Inclusion Criteria:

- primary diagnosis of Panic disorder with or without Agoraphobia (all levels of agoraphobia are included).

Exclusion Criteria:

• current substance abuse or dependence,
• current active suicidal potential;
• any history of psychosis, bipolar disorder (I or II) or cyclothymia;
• pending application or existing medical disability claim;
• significant cognitive impairment,
• current uncontrolled general medical illness requiring intervention,
• psychotherapy directed at anxiety or panic which will not be discontinued by the first treatment visit, and daily use of 2mg of Xanax or equivalent.

Exclusion criteria for paroxetine study:

• hypersensitivity to Selective Serotonin Reuptake Inhibitors (SSRI),
• pregnancy, lactation, or planned pregnancy during the course of the study,
• contemporaneous medication that may interfere or interact with paroxetine,
• prior treatment with therapeutic doses of paroxetine (40mg/d for 1 mo),
• concurrent treatment with antidepressants.