Illusions occur due to a mismatch between physical stimuli and its perception. Our perceptions are not always veridical, and sometimes we fail to interpret the sensory information correctly. This results in misinterpretation of information received by our sensory organs, which is the fundamental cause of illusions.

Illusions occur because people do not always perceive the world as it is; instead, they engage in its construction. This construction happens sometimes based on the features of stimuli and sometimes based on their experiences in a given environment.

Socio-cultural factors play an important role in causing illusions. They generate differential familiarity with and salience of stimuli as well as certain habits of perceptual inference among people. For example, African subjects showed greater susceptibility to horizontal-vertical illusion due to living in dense forests where they regularly experienced verticality (long trees). Western subjects showed greater susceptibility to Muller-Lyer illusion because they lived in environments characterised by right angles.

Some illusions are universal and occur due to external stimulus situations that generate the same experience in everyone. These are also called "primitive organisations". Other illusions are personal and vary from individual to individual based on their specific experiences and cultural background.