Photovoltaic photorefractive binary waveguide arrays are fabricated by proton implantation and selective light illumination on top of an iron-doped near stoichiometric lithium niobate crystal. Linear discrete diffraction and nonlinear formation of gap solitons were investigated by single-channel excitation using Gaussian light beams coupled into either wide or narrow waveguide channels. The results show that, at low power, linear light propagation leads to discrete diffraction, whilst for higher input power the focusing mechanism dominates, finally leading to the formation of gap solitons in the binary waveguide arrays. Our simulation of light propagation based on a nonlinear beam propagation method confirms the experimental findings. © 2009 Springer-Verlag.