The NMDA receptor partial agonist d-cycloserine (DCS) enhances the extinction of learned fear in rats and exposure therapy in humans with anxiety disorders. Despite these benefits, little is known about the mechanisms by which DCS promotes the loss of fear. The present study examined whether DCS augments extinction retention (1) through reductions in conditioned stimulus (CS) processing or (2) by promoting the development of conditioned inhibition to contextual cues. Rats administered DCS prior to extinction showed enhanced long-term extinction retention (Experiments 3 and 4). The same nonreinforced CS procedure used in extinction also reduced freezing at test when presented as pre-exposure before conditioning, demonstrating latent inhibition (Experiment 1). DCS administered shortly prior to pre-exposure had no effect on latent inhibition using parameters which produced weak (Experiment 2) or strong (Experiment 3) expression of latent inhibition. Therefore, DCS facilitated learning involving CS-alone exposures, but only when these exposures occurred after (extinction) and not before (latent inhibition) conditioning. We also used a retardation test procedure to examine whether the extinction context gained inhibitory properties for rats given DCS prior to extinction. With three different footshock intensities, there was no evidence that DCS promoted accrual of associative inhibition to the extinction context (Experiment 4). The present findings demonstrate that DCS does not facilitate extinction by reducing CS processing or causing the extinction context to become a conditioned inhibitor. Investigations into the mechanisms underlying the augmentation of extinction by DCS are valuable for understanding how fear can be inhibited.