Sporting Kansas City midfielder Gianluca Busio broke a second-half deadlock, while a Giovanni Reyna penalty kick and Ricardo Pepi insurance goal sealed the win at the Concacaf Championships in Bradenton, Florida.
The Americans were the heavy favorite to advance, but poor finishing and some resolute Panama defending kept the match at 0-0 into the second half.
Busio missed a clear look in front of goal in the 50th minute, but sent his shot over the crossbar. He needed just four minutes to atone for that miss when he collected a pass from Seattle Sounder Alfonso Ocampo-Chavez and slipped into the penalrty area before sliding his shot past Panama's goalkeeper for the 1-0 lead and Busio's fifth goal of the Concacaf Championships.
Ocampo-Chavez, who signed his first pro contract just before the Concacaf Championships, helped set up the second U.S. goal when he drew a penalty kick in the 59th minute. Reyna, the son of former U.S. national team captain Claudio Reyna, converted the spot kick for his fifth goal of the tournament.
Pepi added an insurance goal just six minutes after replacing Reyna. The FC Dallas academy product raced onto a Daniel Leyva pass and converting in the 75th minute.
The victory, the U.S. team's fifth straight in the tournament, moves the Americans into the Concacaf Championship semifinals, where they will face Canada on Tuesday in a rematch of a dramatic group stage meeting won by the United States, 3-2.
A win against Canada on Tuesday will move the Americans into the Concacaf Championship final, on Thursday.
The United States will take part in its 17th Under-17 World Cup, with the 2019 edition of the tournament set for Brazil in October.
The U.S. U-17 team, which featured Josh Sargent and Tim Weah, reached the quarterfinals of the 2017 Under-17 World Cup, falling to eventual champion England.