OBJECTIVE: The authors sought to characterize the functional impairment in patients with panic disorder, specifically the variance in impairment explained by demographic and clinical variables. METHOD: Sixty-two patients with panic disorder and 61 comparison subjects from three primary care clinic sites were assessed with an adapted form of the Structured Clinical Interview for DSM-III-R. Impairment was assessed according to three measures from the 36-item Short-Form Health Survey (general health perception, mental health, and physical functioning) as well as a principal component factor of the survey. Subjects were also compared with respect to personality variables, presence and severity of chronic medical illness, and demographic characteristics. Stepwise multiple regressions with and without pairwise interactions were used to construct models of disability in the patients with panic disorder. RESULTS: The patients with panic disorder were more impaired than comparison subjects on each measure of the Short-Form Health Survey. The panic disorder diagnosis combined with major depression, increasing neuroticism and age, less education, and an interaction between panic disorder and age accounted for 48%-77% of the variance in impairment scores. Gender and ethnicity contributed modestly to the variance in impairment in physical functioning, whereas no contribution was demonstrated for chronic medical illness or city of residence. CONCLUSIONS: Factors in addition to panic phenomena contribute to the severe impairment seen in patients with panic disorder. Further research about factors that affect impairment may help improve clinical approaches to this illness.