One central problem in vision is how to compensate for retinal slip. A novel illusion (visual jitter) suggests the compensation mechanism is based solely on retinal motion. Adaptation to visual noise attenuates the motion signals used by the compensation stage, producing illusory jitter due to the undercompensation of retinal slip. Here, we investigated the neural substrate of retinal slip compensation during this illusion using high-field fMRI and retinotopic mapping in flattened cortical format. When jitter perception occurred, MR signal decreased in lower stages of the visual system but increased prominently in area MT+. In conclusion, visual areas as early as V1 are responsible for the adaptation stage, and MT+ is involved in the compensation stage. The present finding suggests the pathway from V1 to MT+ has an important role in stabilizing the visual world.