Hyperventilation syndrome and panic disorder are both common, serious, and easily treatable disorders. The similarity of their symptoms and physiology, the demonstration of hyperventilation during spontaneous and laboratory-induced panic episodes, provocation of panic-like symptoms in some patients with panic disorder using hyperventilation, the importance of psychologic factors in producing hyperventilation, and successful treatment of panic disorder with breathing retraining all indicate a strong association between these two conditions. About 50 percent of patients in each group show evidence of both disorders. It is suggested that many patients in each group show evidence of both disorders. It is suggested that many patients with either diagnosis have the same disorder and share a biologically and often genetically determined hypersensitivity of a central "alarm" system. Panic and hyperventilation provoked by inappropriate activation of this system are postulated to reinforce each other by a positive feedback loop. Treatments directed at any part of this loop are likely to be successful. Clinical implications of the link between these conditions are discussed.