The Panic Belief Inventory (PBI) was developed to assess beliefs that increase the likelihood of catastrophic reactions to physical and emotional experiences in panic disorder. In the first stage of scale development, 197 panic disorder patients completed the PBI and standard self-report inventories of psychiatric symptomatology. An exploratory factor analysis yielded a 4-factor solution from which a 35-item instrument with 4 scales was constructed. The shortened measure and its scales had good internal consistency and convergent validity and moderate discriminant validity. Subsequently, 22 panic disorder patients who received cognitive therapy completed the PBI and other self-report inventories of dysfunctional cognitions at intake, 4 weeks, 8 weeks, termination, and several follow-up intervals. Results indicated that the PBI decreased significantly across treatment, with the largest decline occurring between intake and 4 weeks into treatment. The PBI correlated more strongly with dysfunctional cognitions associated with anxiety than dysfunctional cognitions associated with depression. These results provide preliminary evidence that the PBI has adequate psychometric characteristics, is useful to assess change in dysfunctional beliefs during treatment, and has the potential to advance cognitive theories of panic.