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Effects of alcohol and cognitive demands on reactions to threat were examined using startle response potentiation to index negative emotion. Men and women received nonalcoholic or alcoholic beverages prior to a series of trial blocks, signaled by light cues indicating that shocks might be delivered (“threat” blocks) or that none would occur (“safe” blocks). Within half of the blocks, participants intermittently viewed pleasant photographic slides. Alcohol attenuated overall startle reactivity, but robust fear potentiation (larger startle magnitudes and shorter latencies during threat versus safe blocks) did not differ by beverage condition. Decomposition of the Beverage × Threat × Slide interaction revealed significant fear potentiation in all conditions, except the one in which alcohol was combined with slides. Thus, dampening of stress response by alcohol may depend on diminished ability to process competing cognitive demands.