Flankers can strongly deteriorate performance on a visual target (crowding). For example, vernier offset discrimination is strongly affected by neighboring flankers. Interestingly, performance for longer and shorter flankers is better than performance for equal length flankers. We previously found that crowding is strongest when the vernier and the flankers group together (same length flankers) and weaker when they ungroup (shorter or longer flankers). Here, we used high density EEG to investigate the mechanisms underlying crowding. The P1 wave amplitude correlated well with the length of flankers (stimulus energy). The N1 wave amplitude correlated well with performance, with the highest amplitudes occurring for long flankers, intermediate ones for short flankers, and low amplitudes for medium flankers. The N1 amplitude did not depend on the task difficulty per se but on target-flanker grouping, because increasing vernier offset size did not change the N1 amplitude. We show that the N1 reduction corresponds to suppression in crowding.