Recent physiological studies show that the spatial context of visual stimuli enhances the response of cells in primary visual cortex to weak stimuli and suppresses the response to strong stimuli. A model of orientation-tuned neurons was constructed to explore the role of lateral cortical connections in this dual effect. The differential effect of excitatory and inhibitory current and noise conveyed by the lateral connections explains the physiological results as well as the psychophysics of pop-out and contour completion. Exploiting the model’s property of stochastic resonance, the visual context changes the model’s intrinsic input variability to enhance the detection of weak signals.