About ten percent of people experiencing a traumatic event will subsequently develop post-traumatic stress disorder (PTSD). PTSD is characterized by an exaggerated fear response which fails to extinguish over time and cannot be inhibited in safe contexts. The neurobiological correlates of PTSD involve enhanced salience processing (i.e. amygdala, dorsal anterior cingulate cortex (dACC) and anterior insula (AI) hyperactivity), and reduced top-down inhibitory control over this fear response (i.e. dorsal and ventromedial prefrontal cortex (vmPFC) hypoactivity and diminished structural and functional connectivity between the vmPFC, hippocampus and amygdala). Therefore, dampening the exaggerated fear response (i.e. by reducing amygdala hyperactivity) and enhancing top-down inhibitory control (i.e. by promoting prefrontal control over the amygdala) during psychotherapy is an important target for medication-enhanced psychotherapy (MEP) in PTSD patients. Since the neuropeptide oxytocin (OT) has been found to act on these two processes, we propose that OT is a promising pharmacological agent to boost treatment response in PTSD. Human fMRI studies indicate that intranasal OT attenuates amygdala (hyper)activity and enhances connectivity of the amygdala with the vmPFC and hippocampus, resulting in increased top-down control over the fear response. In addition, intranasal OT was found to attenuate amygdala–brainstem connectivity and to change activity and connectivity in nodes of the salience network (i.e. AI and dACC). Furthermore, OT administration may modulate hypothalamus–pituitary–adrenal (HPA) axis and autonomic nervous system (ANS) function and may enhance social behaviour, which could be beneficial in the therapeutic alliance. We also discuss contextual and interindividual factors (e.g. gender and social context) which may influence the effectiveness of OT in MEP. In all, we propose that intranasal OT given prior to each psychotherapy session may be an effective additive treatment to boost treatment response in PTSD.