The bombing raid resulted in the sinking of the Panay as well as the deaths of three Americans on board, plus an unknown but likely high casualty toll amongst the Chinese passengers in the three river tankers.

[3] However, camera footage taken during the attack showed Japanese aircraft flying so low near the Panay that the pilots' faces were visible, providing "potent evidence that the mistaken identity claim was not true.

In addition to the Panay and her consort of three tankers, Japanese aircraft and land forces would attack a multitude of other vessels belonging to the Western powers along the Yangtze near Nanjing.

The Japanese then began a fierce attack on the city and its surrounding region, which would later culminate in the infamous massacre that resulted in the deaths of hundreds of thousands of civilians and prisoners of war.

On December 11, the Panay evacuated some of the last remaining Americans from the city, bringing the number of people aboard to five officers, 54 enlisted men, four US embassy staff, and 10 civilians, including Universal Newsreel cameraman Norman Alley, Fox Movietone News cameraman Eric Mayell, the New York Times's Norman Soong, Collier's Weekly correspondent Jim Marshall, La Stampa correspondent Sandro Sandri and Corriere della Sera correspondent Luigi Barzini Jr.[5] The Panay was also tasked with escorting three Standard Oil tankers, Mei Ping, Mei An, and Mei Hsia, which were carrying some 800 Chinese employees of Standard Vacuum Oil and their families.

Geist, an officer aboard Panay, "the day before we told the Japanese army in the area who we were," and three U.S. flags were plainly visible on the ship.

Storekeeper First Class Charles Lee Ensminger, Standard Oil tanker captain Carl H. Carlson and Italian reporter Sandro Sandri were killed, Coxswain Edgar C. Hulsebus died later that night.

Grew, whose experience in the foreign service spanned over 30 years, "remembered the USS Maine," the U.S. Navy ship that blew up in Havana Harbor in 1898.

Chief of Staff of Japanese naval forces in northern China, Vice Admiral Rokuzo Sugiyama, was assigned to make an apology.

[18] At the meeting held at the American embassy in Tokyo on December 23, Japanese officials maintained that one navy airplane had attacked a boat by machine gun for a short period of time and that Japanese army motor boats or launches had been attacking the Chinese steamers escaping upstream on the opposite bank.

[19] Following the incident, Japanese individuals and organizations sent letters of apology and gifts of money to U.S. diplomatic offices and the U.S. Navy Department in Washington, D.C.

The most prominent donor was the America-Japan Society, headed by Prince Tokugawa Iesato, which amassed ¥16,242.56 in Panay contributions from 7,749 people and 218 organizations.

Grew kept all money received related to the Panay incident in the embassy safe until the State Department could find a solution.

Tower also informed Grew that a reporter of another newspaper—the Tokyo and Osaka Asahi Shimbun, had called on him on 23 December to discuss the Panay contributions.

Towers reassured Grew that "this consulate has not sought to give publicity to the donations received or offered and has furnished information concerning them on two occasions only, when requested."

[20] A final solution to the donations was reached by creating the Japan-America Trust in the name of the Panay survivors and relatives of those who lost their lives.

The formation of the trust allowed the State Department to avoid returning donations or directly distributing them to the U.S. government or individuals.

[21]Fireman First Class John L. Hodge and Lieutenant Clark G. Grazier were presented with the Navy Cross for their actions during the Panay incident.

[5] Colonel Kingoro Hashimoto, who had founded a right-wing secret society in Japan and targeted the Panay as it sank, had also deliberately shelled the British vessels SS Scarab and HMS Cricket beforehand.

The episode has been cited by Philip K. Dick in his novel The Man in the High Castle, depicted in a collectible picture-card of the 1940s, in the series Horrors of War with the title "The sinking of the Panay."