A new illusion, called the configural shape illusion (CSI), is described in which the apparent shape of an object (the ‘‘target’’) is systematically distorted by the presence of an adjacent shape (the ‘‘inducer’’) that is distinct from, but perceptually grouped with, the target. The target is selectively elongated in a direction consistent with the extension of the larger configuration that includes both target and inducer. Experiments 1 and 2 show that the CSI magnitude varies systematically with factors known to influence grouping strength between configural elements, including proximity, good continuation, positional alignment, lightness similarity, hue similarity, and common fate. Experiments 3 through 5 examine the influence of relative inducer size and target size on illusion magnitude.We suggest that the CSI is caused by edge assimilation modulated by similarity between the target and inducer arising from population coding of edge positions. This assimilation account fits well with previous explanations of one-dimensional illusions of linear extent (e.g., the Muller-Lyer and Baldwin illusions), which are extended to account for the present two-dimensional illusion of shape.