Development of anxiety disorders is associated with neurobiological changes in areas that are a critical part of the fear neurocircuitry. Fear conditioning paradigms can offer insight into the mechanisms underlying the neurobiological ontogeny of anxiety. A small number of studies have focused on the effects of age and anxiety separately in school age children. The present study aimed to investigate these effects in 8-13. year old children with higher and lower trait anxiety. We examined differential fear conditioning and extinction using skin conductance responses and fear-potentiated startle in 60 children recruited from a low-income urban population. The results indicated that children under 10. years of age show poor discrimination of conditioned stimuli, and that anxiety increases fear responses during fear acquisition. After controlling for age and trauma exposure, fear-potentiated startle to the safety cue predicted child anxiety levels suggesting that impaired safety signal learning may be a risk factor for anxiety disorders in adulthood. Identifying risk phenotypes in children may provide opportunities for early intervention and prevention of illness.