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Objective: The purpose of this study was to determine the efficacy of panic-focused psychodynamic psychotherapy relative to applied relaxation training, a credible psychotherapy comparison condition. Des- pite the widespread clinical use of psychodynamic psychotherapies, randomized controlled clinical trials evaluating such psychotherapies for axis I disorders have lagged. To the authors’ knowledge, this is the first efficacy randomized controlled clinical trial of panic-focused psychodynamic psychotherapy, a manualized psychoanalytical psychotherapy for patients with DSM-IV panic disorder. Method: This was a randomized controlled clinical trial of subjects with primary DSM-IV panic disorder. Participants were recruited over 5 years in the New York City metropolitan area. Subjects were 49 adults ages 18–55 with primary DSM-IV panic disorder. All subjects received assigned treatment, panic-focused psychodynamic psychotherapy or applied relaxation training in twice-weekly sessions for 12 weeks. The Panic Disorder Severity Scale, rated by blinded independent evaluators, was the primary outcome measure. Results: Subjects in panic-focused psychodynamic psychotherapy had significantly greater reduction in severity of panic symptoms. Furthermore, those receiving panic-focused psychodynamic psychotherapy were significantly more likely to respond at treatment termination (73% versus 39%), using the Multicenter Panic Disorder Study response criteria. The secondary outcome, change in psychosocial functioning, mirrored these results. Conclusions: Despite the small cohort size of this trial, it has demonstrated preliminary efficacy of panic-focused psychodynamic psychotherapy for panic disorder.