Surface segregation provides an efficient way to parse the visual scene for perceptual analysis. Here, we investigated the segregation of a bivectorial motion display into transparent surfaces through a psychophysical task and fMRI. We found that perceptual transparency correlated with neural activity in the early areas of the visual cortex, suggesting these areas may be involved in the segregation of motion-defined surfaces. Two oppositely rotating, uniquely colored random dot kinematograms (RDKs) were presented either sequentially or in a spatially interleaved manner, displayed at varying alternation frequencies. Participants reported the color and rotation direction pairing of the RDKs in the psychophysical task. The spatially interleaved display generated the percept of motion transparency across the range of frequencies tested, yielding ceiling task performance. At high alternation frequencies, performance on the sequential display also approached ceiling, indicative of perceived transparency. However, transparency broke down in lower alternation frequency sequential displays, producing performance close to chance. A corresponding pattern mirroring the psychophysical data was also evident in univariate and multivariate analyses of the fMRI BOLD activity in visual cortical areas V1, V2, V3, V3AB, hV4, and V5/MT+. Using gray RDKs, we found significant presentation by frequency interactions in most areas; differences in BOLD signal between presentation types were significant only at the lower alternation frequency. Multivariate pattern classification was similarly unable to discriminate between presentation types at the higher frequency. This study provides evidence that early visual cortex may code for motion-defined surface segregation, which in turn may enable perceptual transparency.