Segregation of objects from their backgrounds is a fundamental visual function and one that is particularly effective when objects are in motion. Theoretically, suppressive center-surround mechanisms are well suited for accomplishing motion segregation. This longstanding hypothesis, however, has received limited empirical support. We report converging correlational and causal evidence that spatial suppression of background motion signals is critical for rapid segmentation of moving objects. Motion segregation ability is strongly predicted by both individual and stimulus-driven variations in spatial suppression strength. Moreover, aging-related superiority in perceiving background motion is associated with profound impairments in motion segregation. This segregation deficit is alleviated via perceptual learning, but only when motion segregation training also causes decreased sensitivity to background motion. We argue that perceptual insensitivity to large moving stimuli effectively implements background subtraction, which, in turn, enhances the visibility of moving objects and accounts for the observed link between spatial suppression and motion segregation.