Fifteen healthy subjects underwent a double-blind, within-subject, randomized placebo-controlled study to investigate the effects of psilocybin on the formation of visual hallucinations, by measuring the effects of psilocybin on α oscillations and early visual-evoked P1 and N170 potentials. The role of the serotonin 5-HT2A receptors was investigated using 5-HT2A receptor antagonist, ketanserin. Subjects received four different drug combinations of a placebo, psilocybin (215 microg/kg), and ketanserin on four different days, two weeks apart. EEG data was collected while the subjects underwent visual stimulus presentations. Psilocybin strongly decreased prestimulus parieto-occipital α power values, which prevented a stimulus-induced α power decrease. Psilocybin strongly decreased N170 potentials which were associated with the appearance of visual perceptual alterations. All of these effects were blocked by ketanserin.