The mechanisms of action underlying treatment are inadequately understood. This study examined 5 variables implicated in the treatment of panic disorder with agoraphobia (PD/AG): catastrophic agoraphobic cognitions, anxiety about bodily sensations, agoraphobic avoidance, anxiety sensitivity, and psychological flexibility. The relative importance of these process variables was examined across treatment phases: (a) psychoeducation/interoceptive exposure, (b) in situ exposure, and (c) generalization/follow-up.; Data came from a randomized controlled trial of cognitive behavioral therapy for PD/AG (n = 301). Outcomes were the Panic and Agoraphobia Scale (Bandelow, 1995) and functioning as measured in the Clinical Global Impression scale (Guy, 1976). The effect of process variables on subsequent change in outcome variables was calculated using bivariate latent difference score modeling. Change in panic symptomatology was preceded by catastrophic appraisal and agoraphobic avoidance across all phases of treatment, by anxiety sensitivity during generalization/follow-up, and by psychological flexibility during exposure in situ. Change in functioning was preceded by agoraphobic avoidance and psychological flexibility across all phases of treatment, by fear of bodily symptoms during generalization/follow-up, and by anxiety sensitivity during exposure.; The effects of process variables on outcomes differ across treatment phases and outcomes (i.e., symptomatology vs. functioning). Agoraphobic avoidance and psychological flexibility should be investigated and therapeutically targeted in addition to cognitive variables.