Progress in our understanding of autism spectrum disorder (ASD) has recently been sought by characterising how systematic differences in canonical neural computations employed across the sensory cortex might contribute to clinical symptoms in diverse sensory, cognitive, and social domains. A key proposal is that ASD is characterised by reduced divisive normalisation of sensory responses. This provides a bridge between genetic and molecular evidence for an increased ratio of cortical excitation to inhibition in ASD and the functional characteristics of sensory coding that are relevant for understanding perception and behaviour. Here we tested this hypothesis in the context of gaze processing (i.e., the perception of other people's direction of gaze), a domain with direct relevance to the core diagnostic features of ASD. We show that reduced divisive normalisation in gaze processing is associated with specific predictions regarding the psychophysical effects of sensory adaptation to gaze direction, and test these predictions in adults with ASD. We report compelling evidence that both divisive normalisation and sensory adaptation occur robustly in adults with ASD in the context of gaze processing. These results have important theoretical implications for defining the types of divisive computations that are likely to be intact or compromised in this condition (e.g., relating to local vs distal control of cortical gain). These results are also a strong testament to the typical sensory coding of gaze direction in ASD, despite the atypical responses to others' gaze that are a hallmark feature of this diagnosis.