This is a two phase, 14-16 week research study in which participants who remain symptomatic at the end of one phase (4-6 weeks) enter into the next phase. In phase I, all participants receive prolonged exposure (PE) therapy. Participants who continue to have significant distress because of posttraumatic stress disorder after 8 sessions of therapy will enter Phase II. In Phase II subjects will receive 5 more sessions of PE therapy and be randomly assigned (by chance, like a flip of a coin) to receive paroxetine-cr (Paxil-CR) or placebo (contains no active medication). Participants receive this combined treatment over the next 10 weeks.