A lithographic apparatus comprises an illumination system for supplying a beam of radiation, a patterning arrangement incorporating an array of individually controllable elements for imparting a pattern to the beam cross-section, a substrate table for supporting a substrate, and a projection system incorporating a microlens array for projecting the beam onto a target portion of the substrate. An error compensator is provided for supplying error correction values for compensating for the effect of positional errors in the microlens array, and a grey scale modulator is provided for supplying drive signals to controllable elements of the patterning arrangement in dependence on the error correction values in order to compensate for the effect of positional errors in the microlens array by varying the intensity of some parts of the pattern relative to other parts of the pattern.