Medial prefrontal cortical areas have been hypothesized to underlie altered contextual processing in posttraumatic stress disorder (PTSD). We investigated brain signaling of contextual information in this disorder. Eighteen PTSD subjects and 16 healthy trauma-exposed subjects underwent a two-day fear conditioning and extinction paradigm. On day 1, within visual context A, a conditioned stimulus (CS) was followed 60% of the time by an electric shock (conditioning). The conditioned response was then extinguished (extinction learning) in context B. On day 2, recall of the extinction memory was tested in context B. Skin conductance response (SCR) and functional magnetic resonance imaging (fMRI) data were collected during context presentations. There were no SCR group differences in any context presentation. Concerning fMRI data, during late conditioning, when context A signaled danger, PTSD subjects showed dorsal anterior cingulate cortical (dACC) hyperactivation. During early extinction, when context B had not yet fully acquired signal value for safety, PTSD subjects still showed dACC hyperactivation. During late extinction, when context B had come to signal safety, they showed ventromedial prefrontal cortex (vmPFC) hypoactivation. During early extinction recall, when context B signaled safety, they showed both vmPFC hypoactivation and dACC hyperactivation. These findings suggest that PTSD subjects show alterations in the processing of contextual information related to danger and safety. This impairment is manifest even prior to a physiologically-measured, cue-elicited fear response, and characterized by hypoactivation in vmPFC and hyperactivation in dACC.