Over the past two decades, substantial knowledge has been attained about the mechanisms underlying the acquisition and subsequent extinction of conditioned fear. Knowledge gained on the biological basis of Pavlovian conditioning has led to the general acceptance that fear extinction may be a useful model in understanding the underlying mechanisms in the pathophysiology of anxiety disorders and may also be a good model for current therapies treating these disorders. Lacking in the current knowledge is how men and women may or may not differ in the biology of fear and its extinction. It is also unclear how the neural correlates of fear extinction may mediate sex differences in the etiology, maintenance, and prevalence of psychiatric disorders. In this review, we begin by highlighting the epidemiological differences in incidence rate. We then discuss how estradiol (E2), a primary gonadal hormone, may modulate the mechanisms of fear extinction and mediate some of the sex differences observed in psychiatric disorders.