We investigated the role of prefrontal cortex (PFC) in local contextual processing using a combined event-related potentials and lesion approach. Local context was defined as the occurrence of a short predictive series of visual stimuli occurring before delivery of a target event. Targets were preceded by either randomized sequences of standards or by sequences including a three-stimulus predictive sequence signalling the occurrence of a subsequent target event. PFC lesioned patients were impaired in their ability to use local contextual information. The response time for controls revealed a larger benefit for predictable targets than for random targets relative to PFC patients. PFC patients had reduced amplitude of a context-dependent positivity and failed to generate the expected P3b latency shift between predictive and non-predictive targets. These findings show that PFC patients are unable to utilize predictive local context to guide behaviour, providing evidence for a critical role of PFC in local contextual processing.