The move comes a day after President Nicolas Maduro broke diplomatic relations and froze economic ties with Panama.
At least 20 people have died in anti-government protests in Venezuela in the last month.
Nicolas Maduro has accused Panama of conspiring to bring down his government.
The latest fallout comes after Panama requested a meeting at the Organization of American States (OAS) to discuss Venezuela’s crisis.
Four diplomats working at Panama’s embassy, including ambassador Pedro Pereira, were declared “persona non grata” on Thursday, according to Panama’s Deputy Foreign Minister Mayra Arosemena.
Venezuela’s Foreign Minister Elias Jaua said his country also had suspended debt negotiations over $1 billion owed to Panamanian exporters, according to reports.
Meanwhile a member of Venezuela’s National Guard and a motorcyclist became the latest victims of the unrest in the country on Thursday.
The pair were shot dead during clashes that broke out when a group of men of motorcycles tried to clear opposition barricades in a street in Caracas.
The opposition accuses the government of using armed civilian groups on motorcycles to break up demonstrations.
Thousands of government supporters and troops took part in a huge parade through the centre of the capital, commemorating the first anniversary of former President Hugo Chavez’s death on March 5.
Panama said it was “astonished” by Venezuela’s decision to break diplomatic relations and called Nicolas Maduro’s words “unacceptable”.
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