OBJECTIVE: Concurrent use of benzodiazepines and psychotherapy for panic disorder is a prevalent but highly controversial practice. Although there are many rationales for that approach, critics contend that benzodiazepines foster drug abuse and dependence and undermine psychosocial treatments in various ways. The authors examine that controversy in the light of recent empirical findings and offer some tentative conclusions and recommendations. METHOD: Data from studies combining benzodiazepines and the leading psychosocial treatment for panic disorder, exposure-based cognitive behavior therapy, are reviewed, and their application to clinical practice is discussed. RESULTS: The strongest support for combined treatment is for the addition of cognitive behavior therapy to pharmacotherapy for patients with agoraphobia and for those whose benzodiazepine treatment is being discontinued. The greatest problem with combined treatment is relapse after drug discontinuance. CONCLUSIONS: Combined treatment may be advantageous for some patients, but it must be carefully designed to avoid potential problems. Suggestions for that are given.