The neural integration of afferent inputs evoked by spatiotemporally distributed sensory stimuli is a critical step in the formation of coherent and continuous perceptual representations. Integration mechanisms in various systems include linear and nonlinear summation of sensory responses. One well-known example in the rat barrel system is the suppressive interaction between responses to the consecutive deflection of neighboring whiskers. The mechanism underlying cross-whisker suppression has long been postulated to rely on intracortical postsynaptic inhibition, although this hypothesis has been challenged by recent reports. Here we show, using intracellular and extracellular recordings in vivo, that cross-whisker suppression occurs in the absence of cortical activity. Instead, suppression arises from local circuit operations at multiple levels of the subcortical afferent pathway and is amplified by the nonlinear transformation of synaptic input into spike output in both the thalamus and cortex. Because these cellular processes are common to neural circuits subserving visual and auditory modalities, we propose that the suppressive mechanisms elucidated here are a general property of thalamocortical sensory systems.