Abstract Panic disorder is a debilitating and distressing disorder characterized by recurrent and spontaneous episodes of fear, worry, or distress. These panic attacks are accompanied by at least four anxiety-related symptoms (e.g., palpitations, fear of dying, trembling), and may vary in their phenomenology, incidence, and severity. The presentation of this disorder is further complicated by the frequent presence of psychiatric comorbidity. Nevertheless, recent advances in our understanding of the psychobiology of fear and developments in clinical research (e.g., structural functional imaging, neurogenetics) promise to clarify our understanding of this heterogeneous condition. This article will examine the psychobiological and biological theories of panic disorder, focusing on its underlying neurocircuitry and neurochemistry. The role of gene–environment interactions in the development of panic disorder, and its subsequent diagnosis and treatment, will also be reviewed.