The primary objective for the study is to test the hypothesis that sertraline plus alprazolam XR will result in superior early stabilization of primary care PD patients versus sertraline/placebo over a 12-week treatment period. The secondary objectives of the study are a) to assess withdrawal symptoms during alprazolam XR taper (weeks 5-7 of the 12-week trial) and after discontinuation, b) to compare physical health outcomes, medical services utilization, and cost-effectiveness of the two study interventions across the 12-week treatment period and subsequent three month maintenance treatment with sertraline alone, and c) to assess whether early co-administration of sertraline/ alprazolam XR will result in greater maintenance of treatment response than sertraline/placebo over the three months following the 12 week acute treatment program.

Inclusion Criteria:

• Subjects will include men and women over the age of eighteen;
• the ability to give written informed consent;
• current principal or co-principal psychiatric diagnosis of panic disorder with or without agoraphobia based on DSM-IV criteria (American Psychiatric Association, 1994);
• willing to use an effective means of contraception;
• free of psychoactive medications for at least 2 weeks prior to study enrollment;
• not actively be suicidal.

Exclusion Criteria:

• actively suicidal;
• medical conditions for which either sertraline or alprazolam XR would be contraindicated;
• recent six month history of substance or alcohol abuse;
• history or presence of psychotic or bipolar disorder;
• women who are pregnant or breastfeeding;
• history or presence of a seizure disorder or a known history of more than one childhood febrile seizure;
• presence of a personality disorder severe enough to compromise the investigator's ability to evaluate the efficacy and safety of the study medication;
• concomitant therapy with other psychotropic medication(s);
• clinically significant abnormality during physical examination, vital signs, EKG, urine drug screen, or laboratory tests at the screen visit.