Based on the results of a randomized controlled trial, we examined a model of the mechanisms of efficacy of culturally adapted cognitive-behavior therapy (CBT) for Cambodian refugees with pharmacology-resistant posttraumatic stress disorder (PTSD) and comordid orthostatic panic attacks (PAs). Twelve patients were in the initial treatment condition, 12 in the delayed treatment condition. The patients randomized to CBT had much greater improvement than patients in the waitlist condition on all psychometric measures and on one physiological measure—the systolic blood pressure response to orthostasis (d = 1.31)—as evaluated by repeated-measures MANOVA and planned contrasts. After receiving CBT, the Delayed Treatment Group improved on all measures, including the systolic blood pressure response to orthostasis. The CBT treatment's reduction of PTSD severity was significantly mediated by improvement in orthostatic panic and emotion regulation ability. The current study supports our model of the generation of PTSD in the Cambodian population, and suggests a key role of decreased vagal tone in the generation of orthostatic panic and PTSD in this population. It also suggests that vagal tone is involved in emotion regulation, and that both vagal tone and emotion regulation improve across treatment.