 This study will last 24 weeks and will comprise three phases. In Phase 1, participants will receive the SSRI sertraline for 6 weeks. Phase 1 will be used to determine participants resistance to treatment. During Phase 1, participants will begin a medication schedule and symptom diary and will have weekly study visits to assess regimen adherence and any side effects they may be experiencing. In Phase 2, participants will be randomly assigned to 6 weeks of one of two treatments: sertraline at an elevated dose from that given in Phase 1 or a sertraline and placebo regimen. During Phase 2, participants will have 3 study visits. Self-report scales and diary entries will be used to assess panic disorder symptoms and medication side effects. In Phase 3, participants will be randomly assigned to receive either cognitive behavioral therapy CBT or sertraline and clonazepam for 12 weeks. All participants will have weekly study visits during Phase 3. Questionnaires and self-report scales will be used to assess participants at the end of Phase 3. 