Females and males are different in brain and behavior. These sex differences occur early during development due to a combination of genetic and hormonal factors and continue throughout the lifespan. Previous studies revealed that male rats exhibited significantly higher levels of contextual fear memory than female rats. However, it remains unknown whether a sex difference exists in the contextual fear extinction. To address this issue, male, normally cycling female, and ovariectomized (OVX) female Sprague-Dawley rats were subjected to contextual fear conditioning and extinction trials. Here we report that although male rats exhibited higher levels of freezing than cycling female rats after contextual fear conditioning, female rats subjected to conditioning in the proestrus and estrus stage exhibited an enhancement of fear extinction than male rats. An estrogen receptor (ER) beta agonist diarylpropionitrile but not an ERalpha agonist propyl-pyrazole-triol administration also enhanced extinction of contextual fear in OVX female rats, suggesting that estrogen-mediated facilitation of extinction involves the activation of ERbeta. Intrahippocampal injection of estradiol or diarylpropionitrile before extinction training in OVX female rats remarkably reduced the levels of freezing response during extinction trials. In addition, the locomotion or anxiety state of female rats does not vary across the ovarian cycle. These results reveal a crucial role for estrogen in mediating sexually dimorphic contextual fear extinction, and that estrogen-mediated enhancement of fear extinction involves the activation of ERbeta.