Hallucinations occur in both normal and clinical populations. Due to their unpredictability and complexity, the mechanisms underlying hallucinations remain largely untested. Here we show that visual hallucinations can be induced in the normal population by visual flicker, limited to an annulus that constricts content complexity to simple moving grey blobs, allowing objective mechanistic investigation. Hallucination strength peaked at ~11 Hz flicker and was dependent on cortical processing. Hallucinated motion speed increased with flicker rate, when mapped onto visual cortex it was independent of eccentricity, underwent local sensory adaptation and showed the same bistable and mnemonic dynamics as sensory perception. A neural field model with motion selectivity provides a mechanism for both hallucinations and perception. Our results demonstrate that hallucinations can be studied objectively, and they share multiple mechanisms with sensory perception. We anticipate that this assay will be critical to test theories of human consciousness and clinical models of hallucination.