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Hippo campal impairments are reliably associated with post-traumatic stress disorder (PTSD); however, little research has characterized how increased threat sensitivity may interact with arousal responses to alter hippocampal reactivity, and further how these interactions relate to the sequelae of trauma-related symptoms. In a sample of individuals recently exposed to trauma (N = 116, 76 female), we found that PTSD symptoms at 2 weeks were associated with decreased hippocampal responses to threat as assessed with fMRI. Further, the relationship between hippocampal threat sensitivity and PTSD symptomology only emerged in individuals who showed transient, high threat-related arousal, as assayed by an independently collected measure of fear potentiated startle. Collectively, our finding suggests that development of PTSD is associated with threat-related decreases in hippocampal function because of increases in fear-potentiated arousal. SIGNIFICANCE STATEMENT Alterations in hippocampal function linked to threat-related arousal are reliably associated with post-traumatic stress disorder (PTSD); however, how these alterations relate to the sequelae of trauma-related symptoms is unknown. Prior models based on nontrauma samples suggest that arousal may impact hippocampal neurophysiology leading to maladaptive behavior. Here we show that decreased hippocampal threat sensitivity interacts with fear-potentiated startle to predict PTSD symptoms. Specifically, individuals with high fear-potentiated startle and low, transient hippocampal threat sensitivity showed the greatest PTSD symptomology. These findings bridge literatures of threat-related arousal and hippocampal function to better understand PTSD risk.