This paper performs the nonlinear dynamic analysis and vibration reduction of the panel structures subjected to supersonic airflow. The negative capacitance piezoelectric shunt damping circuit (PSDC) which contains bonded piezoelectric element and external negative capacitance is adopted. Based on the modified Ritz approach and energy approach, the formulations of the nonlinear panel structure with attached piezoelectric element are derived. A unified mathematical model for the nonlinear dynamic analysis of composite panels subjected to general edge boundaries in supersonic airflow is formulated. Furthermore, the Newmark approach and Newton iteration approach are utilized to calculate time domain responses of panel structures under aerodynamic pressure. Several numerical cases are further performed to verify the present formulations. Finally, impacts of several factors on the flutter characteristics of panel structures are investigated and the comparisons concerning the vibration responses of panels having and without PSDC are performed to verify vibration reduction properties of the present method. The numerical results show that the vibration and flutter of panels in supersonic airflow can be sufficiently suppressed by the present simple vibration reduction strategy.