Previous studies have shown that luminance flicker, presented peripheral to a foveal test target, increases thresholds for target detection: the peripheral flicker (PF) effect. These studies have also shown that thresholds are elevated more for luminance targets, relative to chromatic targets. In the present study we examined the specificity of the PF effect on the luminance mechanism and assessed the contribution of modulated stray-light to the test field, as well as longer range spatial interactions. We found that the presence of a foveal luminance pedestal, as well as PF, caused a notch to appear in the spectral sensitivity function around 570 nm. This result confirms the hypothesis that the PF effect decreases the sensitivity of the luminance pathway. To assess the contribution of stray-light to the PF effect, we modulated a luminance pedestal without the presence of PF in order to simulate the stray-light effect in isolation. A decrease in sensitivity for wavelengths around 570 nm occurred with modulated stray-light, suggesting that modulated stray-light contributes substantially to this effect. We then minimized the modulated stray-light by phase-reversing a checkerboard pattern in the periphery. A significant, though smaller, threshold elevation to mid-spectrum stimuli was obtained, suggesting that long range spatial effects are also active in the PF effect. We conclude that the PF effect causes a desensitization of foveal luminance pathways via local and more long range spatial interactions. Our results are consistent with previous data which suggest that the PF effect is due to selective adaptation of cells in the magnocellular pathway (M-cells). Our data imply that local network adaptation may be a property of the magnocellular pathway.