Present study aimed to find out the anxiety factors among students of distance learning of Allama Iqbal Open University. The sample of the study comprised of 322 students of M.Ed. programme selected by using purposive sampling technique. The study was descriptive in nature. Questionnaire was used as the research instrument which was based on five point Likert scale. Mean score and t-test was applied by using SPSS version 21.The results highlighted that factors, like lacunae in admission process, books distribution, assignments, course tutorials and student support services were found to create anxiety among the students of AIOU. The overall mean values for all factors of anxiety were slightly higher in male students as compared to female students. A significant effect of anxiety on the academic performance of distance learners was found. Present research found a significant effect of anxiety on the academic performance among distance learning students of AIOU. It is recommended that University may support students in managing their academic anxiety through counseling and behavioral techniques.