Memory updating is essential for integrating new information into existing representations. However, this process could become maladaptive in conditions like post-traumatic stress disorder (PTSD), when fear memories generalize to neutral contexts. Previously, we have shown that contextual fear memory malleability in rats requires activation of M1 muscarinic acetylcholine receptors in the dorsal hippocampus. Here, we investigated the involvement of this mechanism in the transfer of contextual fear memories to other contexts using a novel fear memory updating paradigm. Following brief reexposure to a previously fear conditioned context, male rats (n = 8-10/group) were placed into a neutral context to evaluate the transfer of fear memory. We also infused the selective M1 receptor antagonist pirenzepine into the dorsal hippocampus before memory reactivation to try to block this effect. Results support the hypothesis that fear memory can be updated with novel contextual information, but only if rats are reexposed to the originally trained context relatively recently before the neutral context; evidence for transfer was not seen if the fear memory reactivation was omitted or if it occurred 6 h before neutral context exposure. The transferred fear persisted for 4 weeks, and the effect was blocked by M1 antagonism. These findings strongly suggest that fear transfer requires reactivation and destabilization of the original fear memory. The novel preclinical model introduced here, and its implication of muscarinic receptors in this process, could therefore inform therapeutic strategies for PTSD and similar conditions.