Acquisition and storage of aversive memories is one of the basic principles of central nervous systems throughout the animal kingdom. In the absence of reinforcement, the resulting behavioural response will gradually diminish to be finally extinct. Despite the importance of extinction, its cellular mechanisms are largely unknown. The cannabinoid receptor 1 (CB1) and endocannabinoids are present in memory-related brain areas and modulate memory. Here we show that the endogenous cannabinoid system has a central function in extinction of aversive memories. CB1-deficient mice showed strongly impaired short-term and long-term extinction in auditory fear-conditioning tests, with unaffected memory acquisition and consolidation. Treatment of wild-type mice with the CB1 antagonist SR141716A mimicked the phenotype of CB1-deficient mice, revealing that CB1 is required at the moment of memory extinction. Consistently, tone presentation during extinction trials resulted in elevated levels of endocannabinoids in the basolateral amygdala complex, a region known to control extinction of aversive memories. In the basolateral amygdala, endocannabinoids and CB1 were crucially involved in long-term depression of GABA (gamma-aminobutyric acid)-mediated inhibitory currents. We propose that endocannabinoids facilitate extinction of aversive memories through their selective inhibitory effects on local inhibitory networks in the amygdala.