The ability to correctly associate cues and contexts with threat is critical for survival, and the inability to do so can result in threat-related disorders such as posttraumatic stress disorder. The prefrontal cortex (PFC) and hippocampus are well known to play critical roles in cued and contextual threat memory processing. However, the circuits that mediate prefrontal-hippocampal modulation of context discrimination during cued threat processing are less understood. Here, we demonstrate the role of a previously unexplored projection from the ventromedial region of PFC (vmPFC) to the lateral entorhinal cortex (LEC) in modulating the gain of behavior in response to contextual information during threat retrieval and encoding. We used optogenetics followed by in vivo calcium imaging in male C57/B6J mice to manipulate and monitor vmPFC-LEC activity in response to threat-associated cues in different contexts. We then investigated the inputs to, and outputs from, vmPFC-LEC cells using Rabies tracing and channelrhodopsin-assisted electrophysiology. vmPFC-LEC cells flexibly and bidirectionally shaped behavior during threat expression, shaping sensitivity to contextual information to increase or decrease the gain of behavioral output in response to a threatening or neutral context, respectively. Glutamatergic vmPFC-LEC cells are key players in behavioral gain control in response to contextual information during threat processing and may provide a future target for intervention in threat-based disorders.