When a figure moves behind a stationary narrow slit, observers often report seeing the figure as a whole, a phenomenon called slit viewing or anorthoscopic perception. Interestingly, in slit viewing, the figure is perceived compressed along the axis of motion. As with other perceptual distortions, it is unclear whether the perceptual space in the vicinity of the slit or the representation of the figure itself undergoes compression. In a psychophysical experiment, we tested these two hypotheses. We found that the percept of a stationary bar, presented within the slit, was not distorted even when at the same time a circle underwent compression by moving through the slit. This result suggests that the compression of form results from figural rather than from space compression. In support of this hypothesis, we found that when the bar was perceptually grouped with the circle, the bar appeared compressed. Our results show that, in slit viewing, the distortion occurs at a non-retinotopic level where grouped objects are jointly represented.