Fear extinction is an evolutionarily conserved biological process that allows an organism to better re-adapt; its deficits can lead to psychiatric disorders. Fear extinction is considered to rely mostly on neuronal function. However, whether and how astrocytes contribute to fear extinction is largely unknown. Here, we show that hippocampal CA1 astrocytes exhibit de novo Ca2+ dynamics during fear extinction. Inhibition of these astrocytic Ca2+ dynamics impairs, while their activation facilitates, fear extinction. In this regulation of fear extinction, the posterior basal forebrain (pBF) cholinergic input to hippocampus drives CA1 astrocytic Ca2+ dynamics through the activation of α4 and α7 subunits of nicotinic acetylcholine receptors. Clinically used acetylcholinesterase inhibitor donepezil increases CA1 astrocytic Ca2+ dynamics and facilitates fear extinction. Thus, our findings demonstrate a previously unrecognized and crucial pathway from pBF cholinergic neurons to CA1 astrocytes that governs natural fear extinction. This neuron-glia signaling pathway may constitute a promising target for treatment of fear- and anxiety-related disorders.