Overcoming specific fears and subsequent anxiety can be greatly enhanced by the presence of familiar social partners, but the neural circuitry that controls this phenomenon remains unclear. To overcome this, the social interaction (SI) habituation test was developed in this lab to systematically investigate the effects of social familiarity on anxiety-like behavior in rats. Here, we show that social familiarity selectively reduced anxiety-like behaviors induced by an ethological anxiogenic stimulus. The anxiolytic effect of social familiarity could be elicited over multiple training sessions and was specific to both the presence of the anxiogenic stimulus and the familiar social partner. In addition, socially familiar conspecifics served as a safety signal, as anxiety-like responses returned in the absence of the familiar partner. The expression of the social familiarity-induced anxiolysis (SFiA) appears dependent on the prefrontal cortex (PFC), an area associated with cortical regulation of fear and anxiety behaviors. Inhibition of the PFC, with bilateral injections of the GABA A agonist muscimol, selectively blocked the expression of SFiA while having no effect on SI with a novel partner. Finally, the effect of D-cycloserine, a cognitive enhancer that clinically enhances behavioral treatments for anxiety, was investigated with SFiA. D-cycloserine, when paired with familiarity training sessions, selectively enhanced the rate at which SFiA was acquired. Collectively, these outcomes suggest that the PFC has a pivotal role in SFiA, a complex behavior involving the integration of social cues of familiarity with contextual and emotional information to regulate anxiety-like behavior.