This paper presents findings from a multisite study of 126 subjects meeting DSM-III-R criteria for Panic Disorder who also met criteria for a concurrent Major Depressive Episode, Dysthymia, or Depressive Disorder NOS. The study's primary aim was to discern the influence of varying degrees of depression on the comparative efficacy of alprazolam, imipramine and placebo on anxiety outcomes. A placebo-controlled, double-blind, parallel random assignment design was utilized over a total of 16 weeks. There was no medication effect on panic outcomes. At endpoint, percent of anticipatory anxiety (i.e., time spent worrying about having an anxiety attack) was significantly lower in the patients taking active medications vs. placebo. Phobic measures were significantly improved by alprazolam, vs. both imipramine and placebo early in the study; however, by week 8 both active medications were equally superior to placebo in the reduction of phobic symptoms. In addition, both active medications were significantly more effective than placebo in reducing depression. The same efficacy pattern (i.e., active medications superior to placebo) was observed on measures of general functioning. Importantly, there were no significant interactions observed between medication and presence of major depression on the depression measures, indicating that both alprazolam and imipramine were equally efficacious in treating the depression in patients with panic disorder and major depression. Since the patients enrolled in this study suffered from major depressive disorder in the mild to moderate severity range, these results may not be transferrable to patients with panic disorder and severe major depression.