MDMA-assisted psychotherapy for treatment of PTSD has recently progressed to Phase 3 clinical trials and received Breakthrough Therapy designation by the FDA. MDMA used as an adjunct during psychotherapy sessions has demonstrated effectiveness and acceptable safety in reducing PTSD symptoms in Phase 2 trials, with durable remission of PTSD diagnosis in 68% of participants. The underlying psychological and neurological mechanisms for the robust effects in mitigating PTSD are being investigated in animal models and in studies of healthy volunteers. This review explores the potential role of memory reconsolidation and fear extinction during MDMA-assisted psychotherapy. MDMA enhances release of monoamines (serotonin, norepinephrine, dopamine), hormones (oxytocin, cortisol), and other downstream signaling molecules (BDNF) to dynamically modulate emotional memory circuits. By reducing activation in brain regions implicated in the expression of fear- and anxiety-related behaviors, namely the amygdala and insula, and increasing connectivity between the amygdala and hippocampus, MDMA may allow for reprocessing of traumatic memories and emotional engagement with therapeutic processes. Based on the pharmacology of MDMA and the available translational literature of memory reconsolidation, fear learning, and PTSD, this review suggests a neurobiological rationale to explain, at least in part, the large effect sizes demonstrated for MDMA in treating PTSD.