Background. To evaluate the longitudinal course of psychiatric disorders in children of parents with panic disorder (PD) and major depression (MD) as they transition through the period of risk from childhood into adolescence. Method. Over a 5-year follow-up, we compared psychiatric disorders in four groups of children: (1) offspring of parents with PD plus MD (n=136); (2) offspring of parents with PD without MD (n=27); (3) offspring of parents with MD but without PD (n=53); and (4) offspring of non-PD non-MD parents (n=103). Results. Parental PD was significantly associated with increased risk for anxiety disorders, irrespective of parental MD. Parental MD was associated with increased risk for MD, disruptive behavior disorders, and deficits in psychosocial functioning, irrespective of parental PD. Conclusions. These longitudinal findings confirm and extend previous cross-sectional results documenting significant associations between PD and MD in parents and patterns of psychopathology and dysfunction in their offspring.