The ongoing state of the brain radically affects how it processes sensory information. How does this ongoing brain activity interact with the processing of external stimuli? Spontaneous oscillations in the alpha range are thought to inhibit sensory processing, but little is known about the psychophysical mechanisms of this inhibition. We recorded ongoing brain activity with EEG while human observers performed a visual detection task with stimuli of different contrast intensities. To move beyond qualitative description, we formally compared psychometric functions obtained under different levels of ongoing alpha power and evaluated the inhibitory effect of ongoing alpha oscillations in terms of contrast or response gain models. This procedure opens the way to understanding the actual functional mechanisms by which ongoing brain activity affects visual performance. We found that strong prestimulus occipital alpha oscillations—but not more anterior mu oscillations—reduce performance most strongly for stimuli of the highest intensities tested. This inhibitory effect is best explained by a divisive reduction of response gain. Ongoing occipital alpha oscillations thus reflect changes in the visual system's input/output transformation that are independent of the sensory input to the system. They selectively scale the system's response, rather than change its sensitivity to sensory information.