The role of neuromodulators in the enforcement of cooperation is still not well understood. Here, we provide evidence that intranasal applied oxytocin, an important hormone for modulating social behavior, enhances the inclination to sanction free-riders in a social dilemma situation. Contrary to the notion of oxytocin being a pro-social hormone, we found that participants treated with oxytocin exhibited an amplification of self-reported negative social emotions such as anger towards free-riders, ultimately resulting in higher magnitude and frequency of punishment of free-riders compared to placebo. Furthermore, we found initial evidence that oxytocin contributes to the positive effects of a punishment institution by rendering cooperation preferable in the oxytocin condition for even the most selfish players when punishment was available. Together, these findings imply that the neural circuits underlying altruistic punishment are partly targeted by the oxytonergic system and highlight the importance of neuromodulators in group cohesion and norm enforcement within social groups.