Background: The incidence of injury to the inferior alveolar nerve during mandibular molar extraction increased the demand for pre-surgical planning to avoid any complications. Aim: To investigate the diagnostic accuracy of the dental panoramic image compared to cone-beam computed tomography (CBCT) in predicting the inferior alveolar nerve (IAN) exposure during impacted third molar extraction. Materials and methods: This is a prospective study of consecutive patients, consulted for third molar extraction under local anesthesia. Thirty-two patients showed sign of proximity of the roots of the third molars to the mandibular canal from the dental panoramic image, were selected for CBCT. Results: With respect to the interobserver reliability, no significant difference (p < 0.05) was observed for the prediction on nerve exposure and injury from the dental panoramic image, however, showed a significant difference (p = 0.001) for the cone-beam computed tomography. The prevalence of contact between the third molar to the inferior alveolar canal (IAC) was 96.8% with a significant finding p = 0.002. There was a significant difference in the loss of cortex in predicting nerve exposure with p = 0.04. Clinically, three patients had nerve exposure and two patients had neurosensory disturbances. Conclusion: Dental panoramic image is still valuable for predicting the proximity of the third molar to the inferior alveolar canal. Nevertheless, CBCT has the best precision in localizing the close contact between the third molar and the inferior alveolar canal. Clinical significance: There was no significant finding from the CBCT for the incidence of the inferior alveolar nerve exposure and injury. However, it was seen to be accurate in predicting the IAN exposure. All these findings prove that cone-beam computed tomography contributes in the surgical plan, reduced operative time and patient morbidity.