Objective: Panic disorder (PD) has been linked to perturbed processing of threats. This study tested the hypotheses that offspring of parents with PD and offspring with anxiety disorders display relatively greater sensitivity and attention allocation to fear provocation. Method: Offspring of adults with PD, major depressive disorder (MDD), or no disorder (ages 9-19) viewed computer-presented face photographs depicting angry, fearful, and happy faces. Offspring rated (1) subjectively experienced fear level, (2) how hostile the face appeared, and (3) nose width. Attention allocation was indexed by latency to perform ratings. Results: Compared with offspring of parents without PD (n = 79), offspring of PD parents (n = 65) reported significantly more fear and had slower reaction times to rate fear, controlling for ongoing anxiety disorder in the offspring. Offspring with an anxiety disorder (n = 65) reported significantly more fear than offspring without an anxiety disorder but not when parental PD was controlled. Social phobia but no other anxiety disorder in offspring was associated with slower reaction times for fear ratings (but not greater fear ratings). Parental PD and offspring social phobia independently predicted slower reaction time. Conclusions: Results support an association between parental PD and offspring responses to fear provocation. Social phobia in children may have a specific relationship to allocation of attention to subjective anxiety during face viewing. J. Am. Acad. Child Adolesc. Psychiatry, 2005;44(7):664-672. Key Words: anxiety, memory, panic disorder, genetics.