Our state of arousal fluctuates from moment to moment—fluctuations that can have profound impacts on behavior. Arousal has been proposed to play a powerful, widespread role in the brain, influencing processes as far ranging as perception, memory, learning, and decision making. Although arousal clearly plays a critical role in modulating behavior, the mechanisms underlying this modulation remain poorly understood. To address this knowledge gap, we examined the modulatory role of arousal on one of the cornerstones of visual perception: contrast perception. Using a reward-driven paradigm to manipulate arousal state, we discovered that elevated arousal state substantially enhances visual sensitivity, incurring a multiplicative modulation of contrast response. Contrast defines vision, determining whether objects appear visible or invisible to us, and these results indicate that one of the consequences of decreased arousal state is an impaired ability to visually process our environment.