Visual illusions are valuable tools for the scientific examination of the mechanisms underlying perception. In the peripheral drift illusion special drift patterns appear to move although they are static. During fixation small involuntary eye movements generate retinal image slips which need to be suppressed for stable perception. Here we show that the peripheral drift illusion reveals the mechanisms of perceptual stabilization associated with these micromovements. In a series of experiments we found that illusory motion was only observed in the peripheral visual field. The strength of illusory motion varied with the degree of micromovements. However, drift patterns presented in the central (but not the peripheral) visual field modulated the strength of illusory peripheral motion. Moreover, although central drift patterns were not perceived as moving, they elicited illusory motion of neutral peripheral patterns. Central drift patterns modulated illusory peripheral motion even when micromovements remained constant. Interestingly, perceptual stabilization was only affected by static drift patterns, but not by real motion signals. Our findings suggest that perceptual instabilities caused by fixational eye movements are corrected by a mechanism that relies on visual rather than extraretinal (proprioceptive or motor) signals, and that drift patterns systematically bias this compensatory mechanism. These mechanisms may be revealed by utilizing static visual patterns that give rise to the peripheral drift illusion, but remain undetected with other patterns. Accordingly, the peripheral drift illusion is of unique value for examining processes of perceptual stabilization.