This study investigated the diagnostic accuracy of cone beam computed tomography (CBCT) compared to panoramic radiography in determining the anatomical position of the impacted third molar in relation with the mandibular canal. The study sample comprised 53 third molars from 40 patients with an increased risk of inferior alveolar nerve (IAN) injury. The panoramic and CBCT features (predictive variables) were correlated with IAN exposure and injury (outcome variables). Sensitivity and specificity of modalities in predicting IAN exposure were compared. The IAN was exposed in 23 cases during third molar removal and injury occurred in 5 patients. No significant difference in sensitivity and specificity was found between both modalities in predicting IAN exposure. To date, lingual position of the mandibular canal was significantly associated with IAN injury. CBCT was not more accurate at predicting IAN exposure during third molar removal, however, did elucidate the 3D relationship of the third molar root to the mandibular canal; the coronal sections allowed a bucco-lingual appreciation of the mandibular canal to identify cases in which a lingually placed IAN is at risk during surgery. This observation dictates the surgical approach how to remove the third molar, so the IAN will not be subjected to pressure.