Objective: More than half of US military veterans with posttraumatic stress disorder (PTSD) are dependent on alcohol which complicates efforts to optimize treatment. To understand brain mechanisms that could explain this disabling comorbidity, we investigated how brain responses to negative experiences were related to the clinical symptomatology of PTSD and prevalence of alcohol use). Methods: We recorded electroencephalography responses to unpredictable gain/loss feedback in veterans who had been deployed to war zones as part of Operations Enduring or Iraqi Freedom (OEF/OIF). We applied time-frequency principal components analysis to event-related potentials (ERPs) to isolate neural responses to gains and losses, identifying a frontal theta-band component reflecting primarily losses (feedback-related negativity, FRN). Results: The severity of intrusive reexperiencing of traumatic events was associated with enhanced mediofrontal theta signaling during loss, which suggests an increased salience for negative outcomes. At the same time, increased hazardous alcohol use was associated with reduced mediofrontal theta signaling following loss. Thus, enhanced salience signaling during losses was linked to reexperiencing symptoms, while alcohol use may have functioned as a negative reinforcer by maladaptively reducing such salience signaling. Conclusions: A shared neural mechanism appears to underlie co-occurring posttraumatic stress and hazardous alcohol use and highlights the potential for interventions targeting mediofrontal theta signaling to improve the functioning of individuals experiencing these conditions. Future clinical interventions that target mediofrontal theta might modulate exaggerated negative salience processing and effectively reduce trauma-related psychopathology and the draw of alcohol consumption.