The dorsal visual stream codes information crucial to the planning and online control of target-directed reaching movements in dynamic and cluttered environments. Two specific dorsally mediated abilities are the avoidance of obstacles and the online correction for changes in target location. The current study was designed to test whether or not both of these abilities can be performed concurrently. Participants made reaches to touch a target that, on two-thirds of the trials, remained stationary and on the other third "jumped" at movement onset. Importantly, on target-jump trials, a single object (in one of four positions) sometimes became an obstacle that interfered with the reach. When a target jump caused an object to suddenly become an obstacle, we observed clear spatial avoidance behavior, an effect that was not present when the target jumped but the object did not become an obstacle. This automatic spatial avoidance was accompanied by significant velocity reductions only when the risk for collision with the obstacle was high, suggesting an "intelligent" encoding of potential obstacle locations. We believe that this provides strong evidence that the entire workspace is encoded during reach planning and that the representation of all objects in the workspace is available to the automatic online correction system.