Preclinical and clinical studies increasingly implicate endocannabinoids (eCBs) in fear extinction, but the underlying neural circuit basis of their actions is still unclear. Here, we employed a combination of in vivo optogenetics, eCB biosensor imaging, ex vivo electrophysiology and CRISPR-Cas9 gene editing to examine whether basolateral amygdala (BLA) projecting medial prefrontal cortex (mPFC) neurons represent a neural substrate for the effects of eCBs on extinction. We found that excitation of mPFC afferents during extinction mobilizes eCBs in the BLA and that BLA eCBs dynamically signal learned expectancy of shock-omission in the mPFC-BLA circuit to enable extinction, partly through actions at functional cannabinoid CB1 receptors expressed at vmPFC-BLA synapses. Our findings serve to clarify the temporal characteristics and neural circuit basis of the effects of eCBs on fear extinction, informing efforts to target the eCB system as a novel therapeutic approach in trauma, anxiety and other extinction-deficient neuropsychiatric disorders.