In this paper, dynamic instability behavior of a linear viscoelastic panel in supersonic flow is investigated. The quasi-steady piston theory of supersonic flow is employed for the aerodynamic pressure. The partial differential governing equation of isotropic flat panel is derived by introducing viscoelastic structural damping based on Kelvins model. The panel governing equation is transformed into a set of ordinary differential equations via the Galerkin approach. First-order state equations are afterwards obtained and solved by means of a standard eigenvalue calculation. The dynamic instability of viscoelstic panels is predicted by the feature of characteristic roots. The phenomena of coupled-mode flutter without structural damping and single-mode flutter with structural damping induced by the supersonic flow are observed for the different dynamic pressure values. Results indicate that structural damping plays an important role for the stability of panels flutter. Flutter threshold keeps decreasing as viscoelastic structural damping is increased.