Background. Co-morbidity within anxiety disorders, and between anxiety disorders and depression, is common. According to the theory of Gray and McNaughton, this co-morbidity is caused by recursive interconnections linking the brain regions involved in fear, anxiety and panic and by heritable personality traits such as neuroticism. In other words, co-morbidity can be explained by one disorder being an epiphenomenon of the other and by a partly shared genetic etiology. The aim of this paper is to evaluate the theory of Gray and McNaughton using the results of genetic epidemiological studies. Method. Twenty-three twin studies and 12 family studies on co-morbidity are reviewed. To compare the outcomes systematically, genetic and environmental correlations between disorders are calculated for the twin studies and the results from the family studies are summarized according to the method of Klein and Riso. Results. Twin studies show that co-morbidity within anxiety disorders and between anxiety disorders and depression is explained by a shared genetic vulnerability for both disorders. Some family studies support this conclusion, but others suggest that co-morbidity is due to one disorder being an epiphenomenon of the other. Conclusions. Discrepancies between the twin and family studies seem partly due to differences in used methodology. The theory of Gray and McNaughton that neuroticism is a shared risk factor for anxiety and depression is supported. Further research should reveal the role of recursive interconnections linking brain regions. A model is proposed to simultaneously investigate the influence of neuroticism and recursive interconnections on co-morbidity. © 2005 Cambridge University Press.