The adaptive regulation of fear memories is a crucial neural function that prevents inappropriate fear expression. Fear memories can be acquired through contextual fear conditioning (CFC) which relies on the hippocampus. The thalamic nucleus reuniens (NR) is necessary to extinguish contextual fear and innervates hippocampal CA1. However, the role of the NR-CA1 pathway in contextual fear is unknown. We developed a head-restrained virtual reality CFC paradigm, and demonstrate that mice can acquire and extinguish context-dependent fear responses. We found that inhibiting the NR-CA1 pathway following CFC lengthens the duration of fearful freezing epochs, increases fear generalization, and delays fear extinction. Using in vivo imaging, we recorded NR-axons innervating CA1 and found that NR-axons become tuned to fearful freezing following CFC. We conclude that the NR-CA1 pathway actively suppresses fear by disrupting contextual fear memory retrieval in CA1 during fearful freezing behavior, a process that also reduces fear generalization and accelerates extinction.