In image-guided neurosurgery, intraoperative brain shift significantly degrades the accuracy of neuronavigation that is solely based on preoperative magnetic resonance images (pMR). To compensate for brain deformation and to maintain the accuracy in image guidance achieved at the start of surgery, biomechanical models have been developed to simulate brain deformation and to produce model-updated MR images (uMR) to compensate for brain shift. To-date, most studies have focused on shift compensation at early stages of surgery (i.e., updated images are only produced after craniotomy and durotomy). Simulating surgical events at later stages such as retraction and tissue resection are, perhaps, clinically more relevant because of the typically much larger magnitudes of brain deformation. However, these surgical events are substantially more complex in nature, thereby posing significant challenges in model-based brain shift compensation strategies. In this study, we present results from an initial investigation to simulate retractor-induced brain deformation through a biomechanical finite element (FE) model where whole-brain deformation assimilated from intraoperative data was used produce uMR for improved accuracy in image guidance. Specifically, intensity-encoded 3D surface profiles at the exposed cortical area were reconstructed from intraoperative stereovision (iSV) images before and after tissue retraction. Retractor-induced surface displacements were then derived by coregistering the surfaces and served as sparse displacement data to drive the FE model. With one patient case, we show that our technique is able to produce uMR that agrees well with the reconstructed iSV surface after retraction. The computational cost to simulate retractor-induced brain deformation was approximately 10 min. In addition, our approach introduces minimal interruption to the surgical workflow, suggesting the potential for its clinical application.