Background Extinction is a key theoretical model of exposure‐based treatments, such as cognitive behavioural therapy (CBT). This study examined whether individual differences in physiological responses and subjective stimulus evaluations as indices of fear extinction predicted response to CBT. Methods Thirty‐two nonanxious comparisons and 44 anxious, 7‐to‐13‐year‐old children completed a Pavlovian conditioning and extinction task. Anxious children then completed group‐based CBT. Skin conductance responses (SCRs) as well as subjective arousal and valence evaluations were measured in response to a conditioned stimulus paired with an aversive tone (CS+) and another conditioned stimulus presented alone (CS−). Both stimuli were presented alone during extinction. Diagnostic and symptom measures were completed before and after treatment. Results Like nonanxious comparisons, treatment responders did not acquire conditioned negative stimulus evaluations and displayed elevated SCRs that declined significantly across extinction trials. Nonresponders, by contrast, showed elevated negative stimulus evaluations of both CSs that were sensitive to extinction trials but showed no change in SCRs during extinction. Change in physiological but not evaluative indices of fear extinction predicted better treatment outcomes. Conclusions Individual differences in evaluative and physiological indices of fear extinction might moderate response to CBT.