Psychophysical research has documented the existence of three processes in light adaptation: a fast subtractive process, a divisive process that is fast at light onset and slower at light offset, and a very slow subtractive process (Hayhoe et al., 1987). In the neural model developed here, the fast subtractive process is identified with horizontal cell feedback onto cones and the divisive process with amacrine cell feedback onto bipolar cells. The very slow subtractive process is identified with the modulatory feedback circuit from amacrines via interplexiform cells to horizontal cells. A nonlinear dynamical model is developed incorporating these aspects of retinal circuitry along with both ON- and OFF-center M and P pathways. This model is shown to account for many aspects of foveal light adaptation, including negative afterimage formation, and to explain a number of the physiological differences between M and P ganglion cells, including their differing contrast-response functions.