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Emerging evidence suggests that anxiety sensitivity (AS) and CO2-induced fear reactivity are associated with panic attacks and anxiety disorders. However, evidence regarding the unique and potentially synergistic effects of these variables is currently lacking. Our primary aims in this study were to determine whether AS and CO2-induced fear reactivity are unique and potentially interactive vulnerability factors involved in the pathogenesis of panic attacks and anxiety psychopathology. A large nonclinical sample of young adults (N = 404) was prospectively followed over approximately 2 years. AS (i.e., 16-item Anxiety Sensitivity Index total scores) and biological challenge reactivity [i.e., fearful responding to pre- and postchallenge changes in subjective units of distress (SUDS) to a 20-s 20% CO2 challenge] at study entry served as the primary predictor variables. Consistent with expectation, AS and challenge reactivity correlated only moderately with one another. Challenge reactivity was uniquely associated with the development of spontaneous panic attacks, whereas AS was uniquely associated with anxiety disorder diagnoses, including panic disorder. Moreover, the combination of both risk factors predicted spontaneous panic attacks beyond the effects of either risk factor individually. These data provide novel evidence for the unique and combined effects of AS and CO2-induced fear reactivity as risk factors in the development of anxiety and its disorders.