Anxiety patients overgeneralize fear responses, possibly because they cannot distinguish between cues never been associated with a threat (i.e., safe) and threat-associated cues. However, as contexts and not cues are discussed as the relevant triggers for prolonged anxiety responses characterizing many anxiety disorders, we speculated that it is rather overgeneralization of contextual anxiety, which constitutes a risk factor for anxiety disorders. To this end, we investigated generalization of conditioned contextual anxiety and explored modulatory effects of anxiety sensitivity, a risk factor for anxiety disorders. Fifty-five participants underwent context conditioning in a virtual reality paradigm. On Day 1 (acquisition), participants received unpredictable mildly painful electric stimuli (unconditioned stimulus, US) in one virtual office (anxiety context, CTX+), but never in a second office (safety context, CTX−). Successful acquisition of conditioned anxiety was indicated by aversive ratings and defensive physiological responses (i.e., SCR) to CTX+ vs CTX−. On Day 2 (generalization), participants re-visited both the anxiety and the safety contexts plus three generalization contexts (G-CTX), which were gradually dissimilar to CTX+ (from 75 to 25%). Generalization of conditioned anxiety was evident for ratings, but less clear for physiological responses. The observed dissociation between generalization of verbal and physiological responses suggests that these responses depend on two distinct context representations, likely elemental and contextual representations. Importantly, anxiety sensitivity was positively correlated with the generalization of reported contextual anxiety. Thus, this study demonstrates generalization gradients for conditioned contextual anxiety and that anxiety sensitivity facilitates such generalization processes suggesting the importance of generalization of contextual anxiety for the development of anxiety disorders.