The essential role of serotonin (5-hydroxytryptamine (5-HT)) system in the neurobiology and pharmacotherapy of panic disorder (PD) continues to be a topic of intensive interdisciplinary research. Interest in the involvement of 5-HT in PD has been fuelled by clinical studies demonstrating that medications increasing the synaptic availability of 5-HT, such as selective 5-HT re-uptake inhibitors, are effective in the treatment of PD. Rival theories of 5-HT deficiency vs excess have attempted to explain the impact of 5-HT function in PD. In the past decade, knowledge of the role of 5-HT in the neurobiology of PD has expanded dramatically due to much new research including experimental, treatment, brain-imaging, and genetic studies. The current review attempts to summarize the new data and their implications. The challenge and treatment studies generally confirm the specific inhibitory influence of 5-HT on panicogenesis. The brainimaging studies in PD patients demonstrate functional and clinically relevant alterations in various elements of 5-HT system affecting the neurocircuitry of panic. The findings of genetic association studies suggest that certain 5-HT-related genes may contribute to the susceptibility to PD; however, these data are rather limited and inconsistent. It appears that, even if not the primary etiological factor in PD, the 5-HT function conveys important vulnerability, as well as adaptive factors. A better understanding of these processes may be critical in achieving progress in the treatment of patients suffering from PD.