Spontaneous fluctuations of neural activity may explain why sensory responses vary across repeated presentations of the same physical stimulus. To test this hypothesis, we recorded electroencephalography in humans during stimulation with identical visual stimuli and analyzed how prestimulus neural oscillations modulate different stages of sensory processing reflected by distinct components of the event-related potential (ERP). We found that strong prestimulus alpha- and beta-band power resulted in a suppression of early ERP components (C1 and N150) and in an amplification of late components (after 0.4 s), even after controlling for fluctuations in 1/f aperiodic signal and sleepiness. Whereas functional inhibition of sensory processing underlies the reduction of early ERP responses, we found that the modulation of non-zero-mean oscillations (baseline shift) accounted for the amplification of late responses. Distinguishing between these two mechanisms is crucial for understanding how internal brain states modulate the processing of incoming sensory information.