An electronic device may include a display module that produces light having an image, a lens that directs the light to a waveguide, and a waveguide that directs the light to an eye box. The lens may produce a foveated image in the light by applying a non-uniform magnification to the image in the light. The non-uniform magnification may vary as a function of angle within a field of view of the lens. This may allow the foveated image to have higher resolution within the central region than in the peripheral region. Performing foveation using the lens maximizes the resolution of images at the eye box without increasing the size of the display module. Control circuitry on the device may apply a pre-distortion to the image that is an inverse of distortion introduced by the lens in producing the foveated image.