The model of predictive coding suggests that feedback from a higher- to a lower-order visual area carries predictions of lower-level neural activities, whereas the feedforward connections carry the residual errors between the predictions and the actual lower-level activities (Rao and Ballard, 1999). We tested this theory in context of processing of planar motion in early (foveal) visual cortex. In a 2x2 factorial design, human subjects either fixated (eyes still) or carried out smooth pursuit on a display containing a planar random dot-field that was either stationary or moving coherently in-plane. This led to four conditions: (a) fixation on static dot-field, (b) fixation on moving dot-field, (c) pursuit on static dot-field, (d) pursuit of moving dot-field (pursuit was locked to the dot-motion). Neural activity was measured using fMRI at 3T. If early visual cortex coded for retinal motion, (b) and (c) would be expected to activate early visual cortex equally, and more than (a) and (d). In contrast, predictive coding would result in different responses. In addition to the above, early visual cortex would also code the error signal for mismatches between retinal motion input and the prediction for retinal motion, based on e.g. pursuit-related efferent copies. Such mismatches between prediction and input would occur in (b) (retinal motion without prediction of it) and in (d) (absence of retinal motion despite prediction of it). Note that these mismatches are equivalent to the presence of objective motion in the display. Thus, predictive coding would lead to highest responses in (b) (error + input), medium responses in (c) (input only) and (d) (error only), and lowest r