Many people missed or ignored the opening credits of the programme, and in the atmosphere of growing tension and anxiety in the days leading up to the Second World War, took it to be a news broadcast. Contemporary newspapers reported that panic ensued, with people fleeing the area, and others thinking they could smell the poison gas or could see the flashes of the fighting in the distance.

The author Richard J. Hand cites studies by unnamed historians who "calculated that some six million heard the Columbia Broadcasting System broadcast; 1.7 million believed it to be true, and 1.2 million were 'genuinely frightened'". (Hand, 7) While Welles and company were heard by a comparatively small audience (Bergen's audience was an estimated 30 million), the uproar that followed was anything but minute: within a month, there were about 12,500 newspaper articles about the broadcast or its impact (Hand, 7), while Adolf Hitler cited the panic, as Hand writes, as "evidence of the decadence and corrupt condition of democracy." (Hand, 7)

Later studies suggested this "panic" was far less widespread than newspaper accounts suggested. However, it remains clear that many people were caught up — to one degree or another — in the confusion that followed.

Later studies also indicated that many listeners missed the repeated notices that the broadcast was entirely fictional, partly because the Mercury Theatre (an unsponsored "cultural" programme with a relatively small audience) ran opposite the popular Chase & Sanborn Hour over the Red Network of NBC, hosted by Don Ameche and featuring comic ventriloquist Edgar Bergen and singer Nelson Eddy, at the time three of the most popular figures in broadcasting. About 15 minutes into the Chase & Sanborn program the first comic sketch ended and a musical number began, and many listeners presumably began tuning around the dial at that point. According to the American Experience program "The Battle over Citizen Kane", Welles knew the schedule of the Chase & Sanborn show, and scheduled the first report from Grover's Mill at the 12 minute mark to heighten the audience's confusion. As a result, some listeners happened upon the CBS broadcast at the exact point the Martians emerge from their spacecraft.

Many of these listeners were apparently confused — in fairness, it must be noted that the confusion cannot be credited entirely to naivety. Though many of the actors' voices should have been recognisable from appearances on other radio shows, nothing like the War of the Worlds broadcast had ever been attempted in the United States, so listeners were accustomed to accepting newsflashes as reliable.

While there were repeated statements concerning the fictional nature of the program, no such statement was broadcast between the 12 minute and 40 minute marks. In fact, the warning at the 40 minute mark is the only one that occurs after the actors start speaking in character, and before Welles breaks character at the end.

In some northeastern cities people went outside to ask neighbours what was happening (many homes still did not have telephones at this time). As the story was repeated by word of mouth, rumours began to spread, and these rumours caused some panic.

Contemporary accounts spawned urban legends, many of which persist and have come to be accepted through repetition as fact: Several people reportedly rushed to the "scene" of the events in New Jersey to see if they could catch a glimpse of the unfolding events, including a few astronomers from Princeton University who went looking for the "meteorite" that had supposedly fallen near their school. Some people, who had brought firearms, reportedly mistook a farmer's water tower for an alien spaceship and shot at it.

Initially Grover's Mill was deserted, but later crowds developed as people rushed to the area. Eventually police were sent to the area to help control the crowds. To people arriving later in the evening, the scene really did look like the events being narrated on the radio broadcast, with panicked crowds and flashing police lights streaming across the masses.

Some people called CBS, newspapers or the police in confusion over the realism of the simulated news bulletins. There were instances of panic scattered throughout the US as a result of the broadcast, especially in New York and New Jersey.

Edgar Bergen and Don Ameche, who were continuing their Chase & Sanborn Hour broadcast at the same time on NBC, are often credited with "saving the world". It is said that many startled listeners were reassured by hearing their familiar tones on a neighbouring channel.