Contextual associations are critical for survival but must be extinguished when new conditions render them nonproductive. By most accounts, extinction forms a new memory that competes with the original association for control over behavior, but the mechanisms underlying this competition remain largely enigmatic. Here we find the retrieval of contextual fear conditioning and extinction yield contrasting patterns of activity in prefrontal cortex and ventral hippocampus. Within ventral CA1, activation of somatostatin-expressing interneurons (SST-INs) occurs preferentially during extinction retrieval and correlates with differences in input synaptic transmission. Optogenetic manipulation of these cells but not parvalbumin interneurons (PV-INs) elicits bidirectional changes in fear expression following extinction, and the ability of SST-INs to gate fear is specific to the context in which extinction was acquired. A similar pattern of results was obtained following reward-based extinction. These data show that ventral hippocampal SST-INs are critical for extinguishing prior associations and thereby gate relapse of both aversive and appetitive responses.