The Ebbinghaus illusion is argued to be a product of low-level contour interactions or a higher cognitive comparison process. We examined the effect of grouping on the illusion by manipulating objecthood, i.e., the degree to which an object is a cohesive perceptual entity. We hypothesized that reduced objecthood would decrease the illusion magnitude, because the objects become less efficient in the comparison process. To test this hypothesis, we used a version of the illusion where the target and flanking objects were squares that were composed from their corners or sides. Degree of objecthood was manipulated by changing the gap size or rotation angle of the elements constructing the objects, so that larger gaps and angles produced less cohesive objects than smaller. Participants performed an adjustment procedure on the test target to match a control target in size. In addition, subjective reports of the objects’ shape were collected as a measure of perceived shape. Our results show decreased illusion magnitude with increasing gap size and rotation angle. Surprisingly, the perceived shape of the objects did not correlate with illusion magnitude. These results provide novel evidence of the role of mid-level processes in the Ebbinghaus illusion and point to a dissociation between subjective and objective measures of objecthood.