Patients with generalized social anxiety disorder (GSAD) exhibit heightened activation of the amygdala in response to social cues conveying threat (eg, fearful/angry faces). The neuropeptide oxytocin (OXT) decreases anxiety and stress, facilitates social encounters, and attenuates amygdala reactivity to threatening faces in healthy subjects. The goal of this study was to examine the effects of OXT on fear-related amygdala reactivity in GSAD and matched healthy control (CON) subjects. In a functional magnetic resonance imaging study utilizing a double-blind placebo-controlled within-subjects design, we measured amygdala activation to an emotional face matching task of fearful, angry, and happy faces following acute intranasal administration of OXT (24 IU or 40.32 μg) and placebo in 18 GSAD and 18 CON subjects. Both the CON and GSAD groups activated bilateral amygdala to all emotional faces during placebo, with the GSAD group exhibiting hyperactivity specifically to fearful faces in bilateral amygdala compared with the CON group. OXT had no effect on amygdala activity to emotional faces in the CON group, but attenuated the heightened amygdala reactivity to fearful faces in the GSAD group, such that the hyperactivity observed during the placebo session was no longer evident following OXT (ie, normalization). These findings suggest that OXT has a specific effect on fear-related amygdala activity, particularly when the amygdala is hyperactive, such as in GSAD, thereby providing a brain-based mechanism of the impact of OXT in modulating the exaggerated processing of social signals of threat in patients with pathological anxiety.