Previous research suggests that high anxiety sensitivity (AS) young adults are particularly sensitive to alcohol's dampening effects on their responses to arousal-induction challenge [Alcohol.: Clin. Exp. Res. 24 (2000) 1656.]. This sensitivity to alcohol reward may place high AS individuals at increased risk for alcohol abuse. Over-and-above alcohol's pharmacological effects, tension-reduction expectancies might contribute to alcohol's reactivity-dampening effects in high-AS individuals. The present study examined the role of alcohol and alcohol expectancy factors by activating expectancies experimentally. Forty-eight high-AS young adults were randomly assigned to one of three beverage conditions: alcohol (pharmacology plus expectancy), placebo (expectancy only), and control (no pharmacology and no expectancy). Following beverage consumption and absorption, participants underwent a 3-min voluntary hyperventilation challenge. Replicating and extending previous findings, participants in the alcohol condition showed dampened affective and somatic responses to the challenge, and marginally dampened cognitive responses to the challenge, compared to both placebo and control participants. However, placebo participants did not display dampened responses to the challenge relative to control beverage condition participants. Additional analyses suggested that activation of tension-reduction expectancies might have contributed to an “inverse placebo” effect among high-AS participants administered placebo. Implications of the results for future research and for the prevention and treatment of alcohol problems among high-AS individuals are discussed.