The present study investigated the efficacy of a coping-technique, applied relaxation (AR) and cognitive behavior therapy (CBT), in the treatment of panic disorder. Thirty-eight outpatients fulfilling the DSM-III-R criteria for panic disorder with no (n = 30) or mild (n = 8) avoidance were assessed with independent assessor ratings, self-report scales and self-observation of panic attacks before and after treatment, and at a 1-yr follow-up. The patients were treated individually for 12 weekly sessions. The results showed that both treatments yielded very large improvements, which were maintained, or furthered at follow-up. There was no difference between AR and CBT on any measure. The proportion of panic-free patients were 65 and 74% at post-treatment, and 82 and 89% at follow-up, for AR and CBT, respectively. There were no relapses at follow-up, on the contrary 55% of the patients who still had panic attacks at post-treatment were panic-free at follow-up. Besides affecting panic attacks the treatments also yielded marked and lasting changes on generalized anxiety, depression and cognitive misinterpretations. The conclusion that can be drawn is that both AR and CBT are effective treatments for panic disorder without avoidance.