Restoration of images that have been blurred by the effects of a Gaussian blurring function is an ill-posed but well-studied problem. Any blur that is spatially invariant can be expressed as a convolution kernel in an integral equation. Fast and effective algorithms then exist for determining the original image by preconditioned iterative methods. If the blurring function is spatially variant, however, then the problem is more difficult. In this work we develop fast algorithms for forming the convolution and for recovering the original image when the convolution functions are spatially variant but have a small domain of support. This assumption leads to a discrete problem involving a banded matrix. We devise an effective preconditioner and prove that the preconditioned matrix differs from the identity by a matrix of small rank plus a matrix of small norm. Numerical examples are given, related to the Hubble Space Telescope Wide-Field / Planetary Camera. The algorithms that we develop are applicable to other ill-posed integral equations as well. (Also cross-referenced as UMIACS-TR-95-26)