Despite behavioral evidence that variation in ovarian hormones is associated with changes in affect, the neural basis of these processes is poorly understood. We combined functional magnetic resonance imaging (fMRI) with quantitative analysis of ovarian hormones in a within-subject design to investigate brain activation patterns during affective response inhibition, comparing activation between the early follicular (low estrogen and progesterone) and mid-luteal (high estrogen and progesterone) phases of the menstrual cycle in healthy women. There was significantly increased activation in the anterior cingulate and dorsolateral prefrontal cortex (DLPFC) while inhibiting response to positive words during the luteal, compared to the follicular phase. Furthermore, luteal phase estradiol level positively correlated with DLPFC activation while inhibiting response to positive words and negatively correlated with activation in several structures while inhibiting response to negative words, supporting estrogen's modulation of affective processing.