Dopamine modulates medial prefrontal cortex (mPFC) activity to mediate diverse behavioural functions1,2; however, the precise circuit computations remain unknown. One potentially unifying model by which dopamine may underlie a diversity of functions is by modulating the signal-to-noise ratio in subpopulations of mPFC neurons3,4,5,6, where neural activity conveying sensory information (signal) is amplified relative to spontaneous firing (noise). Here we demonstrate that dopamine increases the signal-to-noise ratio of responses to aversive stimuli in mPFC neurons projecting to the dorsal periaqueductal grey (dPAG). Using an electrochemical approach, we reveal the precise time course of pinch-evoked dopamine release in the mPFC, and show that mPFC dopamine biases behavioural responses to aversive stimuli. Activation of mPFC–dPAG neurons is sufficient to drive place avoidance and defensive behaviours. mPFC–dPAG neurons display robust shock-induced excitations, as visualized by single-cell, projection-defined microendoscopic calcium imaging. Finally, photostimulation of dopamine terminals in the mPFC reveals an increase in the signal-to-noise ratio in mPFC–dPAG responses to aversive stimuli. Together, these data highlight how dopamine in the mPFC can selectively route sensory information to specific downstream circuits, representing a potential circuit mechanism for valence processing.