Elastic-plastic indentation of a single-crystal half-space by a rigid cylinder was analyzed by discrete dislocation plasticity. Short-range dislocation interactions were modeled by a set of constitutive rules of dislocation emission, glide, pinning (by obstacles), and annihilation. The occurrence of the first dislocation dipole, multiplication of dislocations, and evolution of subsurface stress field were examined in terms of contact load, dislocation source density, slip-plane distance and orientation angle, and indenter radius. In the presence of defects (dislocation sources), the critical load for dislocation initiation is less than that of a defect-free medium and depends on dislocation source density, slip-plane distance, and indenter radius. The critical indenter radius resulting in deformation under the theoretical material strength is determined from numerical results, and the role of dislocation obstacles is interpreted in terms of their spatial density. Simulations provide insight into yielding and plastic deformation of indented single-crystal materials, and establish a basis for developing coarse-grained plasticity models of localized contact deformation in polycrystalline solids.