We used magnetoencephalography (MEG) to examine the nature of oscillatory brain rhythms when passively viewing both illusory and real visual contours. Three stimuli were employed: a Kanizsa triangle; a Kanizsa triangle with a real triangular contour superimposed; and a control figure in which the corner elements used to form the Kanizsa triangle were rotated to negate the formation of illusory contours. The MEG data were analysed using synthetic aperture magnetometry (SAM) to enable the spatial localisation of task-related oscillatory power changes within specific frequency bands, and the time-course of activity within given locations-of-interest was determined by calculating time-frequency plots using a Morlet wavelet transform. In contrast to earlier studies, we did not find increases in gamma activity (> 30 Hz) to illusory shapes, but instead a decrease in 10–30 Hz activity approximately 200 ms after stimulus presentation. The reduction in oscillatory activity was primarily evident within extrastriate areas, including the lateral occipital complex (LOC). Importantly, this same pattern of results was evident for each stimulus type. Our results further highlight the importance of the LOC and a network of posterior brain regions in processing visual contours, be they illusory or real in nature. The similarity of the results for both real and illusory contours, however, leads us to conclude that the broadband (< 30 Hz) decrease in power we observed is more likely to reflect general changes in visual attention than neural computations specific to processing visual contours.