The central amygdala (CEA), a nucleus predominantly composed of GABAergic inhibitory neurons, is essential for fear conditioning. How the acquisition and expression of conditioned fear are encoded within CEA inhibitory circuits is not understood. Using in vivo electrophysiological, optogenetic and pharmacological approaches in mice, we show that neuronal activity in the lateral subdivision of the central amygdala (CEl) is required for fear acquisition, whereas conditioned fear responses are driven by output neurons in the medial subdivision (CEm). Functional circuit analysis revealed that inhibitory CEA microcircuits are highly organized and that cell-type-specific plasticity of phasic and tonic activity in the CEl to CEm pathway may gate fear expression and regulate fear generalization. Our results define the functional architecture of CEA microcircuits and their role in the acquisition and regulation of conditioned fear behaviour.