PTSD symptoms are associated with heightened fear responses in laboratory fear conditioning paradigms. This study examined the effects of dexamethasone administration on hypothalamic-pituitary-adrenal (HPA) function and fear-potentiated startle (FPS) in trauma-exposed individuals with and without PTSD. We used an established fear discrimination procedure, in which one visual stimulus (CS+, danger cue) was paired with aversive airblasts to the throat (unconditioned stimulus, US), and another stimulus (CS-, safety cue) was presented without airblasts. In addition to FPS, the dexamethasone suppression test (DST) was performed. The study sample (N=100) was recruited from a highly traumatized civilian population in Atlanta, GA. Half of the subjects (n=54, 16 PTSD, 38 controls) underwent conditioning at baseline and the other half (n=46, 17 PTSD, 29 controls) after DST, in a cross-sectional design. We found a significant interaction effect of diagnostic group and dexamethasone treatment. Under baseline conditions, subjects with PTSD showed more than twice as much fear-potentiated startle to the danger cue compared to traumatized controls, F(1,53)=8.08, p=0.006. However, there was no group difference in subjects tested after dexamethasone suppression. Furthermore, there was a significant treatment effect in PTSD subjects but not in controls, with dexamethasone reducing fear-potentiated startle to the CS+, F(1,32)=4.00, p=0.05. There was also a positive correlation between PTSD subjects' FPS and cortisol levels, r=0.46, p=0.01. These results suggest that transient suppression of HPA function via dexamethasone suppression may reduce exaggerated fear in patients with PTSD.