Cholinergic basal forebrain (cBF)-derived neurotransmission plays a crucial role in regulating neuronal function throughout the cortex, yet the mechanisms controlling cholinergic innervation to downstream targets have not been elucidated. Here we report that removing the p75 neurotrophin receptor (p75) from cBF neurons induces a significant impairment in fear extinction consolidation. We demonstrate that this is achieved through alterations in synaptic connectivity and functional activity within the medial prefrontal cortex. These deficits revert back to wild-type levels upon re-expression of the active domain of p75 in adult animals. These findings demonstrate a novel role for cholinergic neurons in fear extinction consolidation and suggest that neurotrophic signaling is a key regulator of cholinergic-cortical innervation and function.