It has recently been shown that adapting to a densely textured stimulus alters the perception of visual space, such that the distance between two points subsequently presented in the adapted region appears reduced (Hisakata, Nishida, & Johnston, 2016). We asked whether this form of adaptation-induced spatial compression alters visual crowding. To address this question, we first adapted observers to a dynamic dot texture presented within an annular region surrounding the test location. Following adaptation, observers perceived a test array comprised of multiple oriented dot dipoles as spatially compressed, resulting in an overall reduction in perceived size. We then tested to what extent this spatial compression influences crowding by measuring orientation discrimination of a single dipole flanked by randomly oriented dipoles across a range of separations. Following adaptation, we found that the magnitude of crowding was predicted by the physical rather than perceptual separation between center and flanking dipoles. These findings contrast with previous studies in which crowding has been shown to increase when motion-induced position shifts act to reduce apparent separation (Dakin, Greenwood, Carlson, & Bex, 2011; Maus, Fischer, & Whitney, 2011).