The outer retina removes the first-order correlation, the background light level, and thus more efficiently transmits contrast. This removal is accomplished by negative feedback from horizontal cell to photoreceptors. However, the optimal feedback gain to maximize the contrast sensitivity and spatial resolution is not known. The objective of this study was to determine, from the known structure of the outer retina, the synaptic gains that optimize the response to spatial and temporal contrast within natural images. We modeled the outer retina as a continuous 2D extension of the discrete 1D model of Yagi et al. (Proc Int Joint Conf Neural Netw 1: 787–789, 1989). We determined the spatio-temporal impulse response of the model using small-signal analysis, assuming that the stimulus did not perturb the resting state of the feedback system. In order to maximize the efficiency of the feedback system, we derived the relationships between time constants, space constants, and synaptic gains that give the fastest temporal adaptation and the highest spatial resolution of the photoreceptor input to bipolar cells. We found that feedback which directly modulated photoreceptor calcium channel activation, as opposed to changing photoreceptor voltage, provides faster adaptation to light onset and higher spatial resolution. The optimal solution suggests that the feedback gain from horizontal cells to photoreceptors should be ~0.5. The model can be extended to retinas that have two or more horizontal cell networks with different space constants. The theoretical predictions closely match experimental observations of outer retinal function.