Introduction Exposure to social trauma may alter engagement with both fear-related and unrelated social stimuli long after. Intriguingly, how simultaneous discrimination of social fear and safety is affected in neurodevelopmental conditions remains underexplored. The role of the neuropeptide oxytocin is established in social behaviors, and yet unexplored during such a challenge post-social trauma. Methods Using Magel2 knockout mice, an animal model of Prader Willi Syndrome (PWS) and Schaaf-Yang Syndrome (SYS), we tested memory of social fear and safety after a modified social fear conditioning task. Additionally, we tracked the activity of oxytocin neurons in the supraoptic (SON) and paraventricular (PVN) nuclei of the hypothalamus by fibre photometry, as animals were simultaneously presented with a choice between a fear and safe social cue during recall. Results Male Magel2 KO mice trained to fear females with electrical footshocks avoided both unfamiliar females and males during recalls, lasting even a week post-conditioning. On the contrary, trained Magel2 WT avoided only females during recalls, lasting days rather than a week post-conditioning. Inability to overcome social fear and avoidance of social safety in Magel2 KO mice were associated with reduced engagement of oxytocin neurons in the SON, but not the PVN. Conclusion In a preclinical model of PWS/SYS, we demonstrated region-specific deficit in oxytocin neuron activity associated with behavioral generalization of social fear to social safety. Insights from this study add to our understanding of oxytocin action in the brain at the intersection of social trauma and PWS/SYS.