Stressful and traumatic events can create aversive memories, which are a predisposing factor for anxiety disorders. The amygdala is critical for transforming such stressful events into anxiety, and the recently discovered neuropeptide S transmitter system represents a promising candidate apt to control these interactions. Here we test the hypothesis that neuropeptide S can regulate stress-induced hyperexcitability in the amygdala, and thereby can interact with stress-induced alterations of fear memory. Mice underwent acute immobilization stress (IS), and neuropeptide S and a receptor antagonist were locally injected into the lateral amygdala (LA) during stress exposure. Ten days later, anxiety-like behavior, fear acquisition, fear memory retrieval, and extinction were tested. Furthermore, patch-clamp recordings were performed in amygdala slices prepared ex vivo to identify synaptic substrates of stress-induced alterations in fear responsiveness. (1) IS increased anxiety-like behavior, and enhanced conditioned fear responses during extinction 10 days after stress, (2) neuropeptide S in the amygdala prevented, while an antagonist aggravated, these stress-induced changes of aversive behaviors, (3) excitatory synaptic activity in LA projection neurons was increased on fear conditioning and returned to pre-conditioning values on fear extinction, and (4) stress resulted in sustained high levels of excitatory synaptic activity during fear extinction, whereas neuropeptide S supported the return of synaptic activity during fear extinction to levels typical of non-stressed animals. Together these results suggest that the neuropeptide S system is capable of interfering with mechanisms in the amygdala that transform stressful events into anxiety and impaired fear extinction.