We examine the statistics of natural monochromatic images decomposed using a multi-scale wavelet basis. Although the coefficients of this representation are nearly decorrelated, they exhibit important higher-order statistical dependencies that cannot be eliminated with purely linear processing. In particular, rectified coefficients corresponding to basis functions at neighboring spatial positions, orientations and scales are highly correlated. A method of removing these dependencies is to divide each coefficient by a weighted combination of its rectified neighbors. Several successful models of the steady-state behavior of neurons in primary visual cortex are based on such "divisive normalization" computations, and thus our analysis provides a theoretical justification for these models. Perhaps more importantly, the statistical measurements explicitly specify the weights that should be used in computing the normalization signal. We demonstrate that this weighting is qualitatively consistent with recent physiological experiments that characterize the suppressive effect of stimuli presented outside of the classical receptive field. Our observations thus provide evidence for the hypothesis that early visual neural processing is well matched to these statistical properties of images.