After moving to Naperville, Illinois, in 2000, Panabaker went to Crone Middle School and then Neuqua Valley High School, participating in the speech team. She graduated from high school when she was 14 years old. In 2003, feeling it was the only way to land acting roles regularly, Panabaker, her sister, and their mother relocated to Los Angeles, California, so she could pursue an acting career. She attended Glendale Community College, studying acting. In 2005, she earned her associate degree and appeared on the national Dean's List. In 2006, she began her senior year at the University of California, Los Angeles, from which she graduated with a Bachelor of Arts in June 2007, again appearing on the Dean's List.

Panabaker followed her initial appearances in commercials with roles in television, including a part in The Guardian (for which she won a Young Artist Award), as well as other television series including Malcolm in the Middle, Law & Order: Special Victims Unit, Medium, and Summerland, and the Disney Channel Original Movie Stuck in the Suburbs. She also appeared in the Lifetime Television productions Sex and the Single Mom and Mom at Sixteen, as well as the well-reviewed miniseries Empire Falls. She considers Empire Falls to be her big break, as it gave her the confidence to pursue her career. In addition, Panabaker appeared in stage productions with roles in musical theater, including West Side Story, Pippin, Once upon a Time, and Beauty Lou and the Country Beast. In 2004, she starred in the ABC film "Searching for David's Heart", alongside co-former Disney star Ricky Ullman. In 2005, Panabaker co-starred in two widely released theatrical films, Sky High and Yours, Mine and Ours. Her next role was in the film Home of the Giants (2008), opposite Ryan Merriman and Haley Joel Osment. She also had a supporting role in the film Mr. Brooks opposite Kevin Costner. In the Disney Channel original movie Read It and Weep, she plays Is, an alternate version of Jamie, who was played by her real-life sister Kay.

She came to wider attention as a cast member alongside James Woods in the CBS legal drama series Shark (2006–08) and is also noted as a scream queen, having starred in the psychological thriller Mr. Brooks (2007) and the horror films Friday the 13th (2009), The Crazies (2010), John Carpenter's The Ward (2010) and Piranha 3DD (2012).

In 2009, Panabaker played Jenna, a main character in 2009's Friday the 13th remake along with Jared Padalecki. Panabaker next starred in the films The Crazies and The Ward.

In 2011, Panabaker starred as Katie Lapp, the lead character in the Hallmark Movie The Shunning, based on the novel by Beverly Lewis. She was to reprise her role in the 2013 sequel The Confession, but a scheduling conflict forced her to drop out. The role was recast, going to Katie Leclerc.

In 2013, she starred in another Hallmark Channel Original Movie, Nearlyweds. On May 5, 2013, Panabaker joined actors including Philip Baker Hall, Bill Pullman, and Maggie Siff in performing at Cedering Fox's WordTheatre, where they read aloud contemporary short fiction.

In 2014, Panabaker starred in Bradley D. King's award-winning science-fiction film Time Lapse, for which she won the award for Best Actor/Actress at the 2014 London Independent Film Festival.

Panabaker volunteers for multiple organizations including the Art of Elysium, Unicef, and Young Storytellers Foundation. In July 2016, Panabaker announced that she was engaged to her longtime boyfriend Hayes Robbins. They were married on June 24, 2017.