The DSM-III-R subclassifies panic disorder (PD) under the anxiety disorders (or anxiety and phobic neuroses) along with phobic, obsessive compulsive (OCD), generalized anxiety and posttraumatic stress disorder (PTSD). Although allowances are made for the specification of the current degree of impairment as severe, e.g., at least eight panic attacks monthly, avoidance behavior resulting in being completely house-bound or compulsions being the major life activity, the anxiety disorder category does not provide for the simultaneous occurrence of associated psychotic features as part of the disorder. In fact, depending on the circumstances, diagnostic hierarchial principles, in the DSM-III-R, require dual diagnoses or a diagnosis of the more pervasive disorder only, if elements of both anxiety and psychosis are present. In contradistinction to the anxiety disorder category, the DSM-III-R recognizes a myriad of psychotic features, including delusions, hallucinations, thought insertion and broadcasting, as extreme manifestations of the affective syndromes. The following case report of a patient with panic disorder, culminating in a florid psychosis, puts into question current official nosology. Conflicting outcome data from the schizophreniform disorders may be due, in part, to the mislabelling of patients with psychoses secondary to severe anxiety disorders as schizophreniform.