The clinical features, pathophysiology, and treatment of panic and phobic disorders are reviewed. Evidence from genetic, epidemiological, biological, and pharmacological studies suggests that phobic and panic disorders differ from other psychiatric illnesses. Dysfunction of the autonomic nervous system, causing excessive release of norepinephrine from the locus ceruleus, is implicated in the pathophysiology of these disorders. Overstimulation of the locus ceruleus by yohimbine, sodium lactate, and carbon dioxide can cause feelings of panic and anxiety in both patients with panic disorder and control subjects. Currently, excessive activity of the locus ceruleus is the only comprehensive neuroanatomic and physiological hypothesis for the etiology of panic disorder. Tricyclic antidepressant agents (TCAs), monoamine oxidase inhibitors (MAOIs), anxiolytic agents, and adrenergic agents all have been used to treat phobic and panic disorders. TCAs and the benzodiazepines, particularly alprazolam, are the drugs most commonly chosen for therapy. If these agents are ineffective, an MAOI or combination therapy can be tried. MAOIs are second-line agents for many patients because of toxicity and dietary limitations. Whether they are more effective than other agents requires further study. Panic and phobic disorders and depression have in common many properties of a dysregulated system; an improved understanding of the pathophysiology of panic and phobic disorders should lead to the development of more effective treatment strategies.