When This Approach Works
Drywall over paneling works in a narrow set of conditions. Before you commit to it, check all of these.
The paneling has to be flat. Press your hand against it in 20 different spots and feel for bulges or hollow areas. If sections have warped or pulled away from the studs, drywall over the top will telegraph every flaw. You cannot fix wavy paneling by sheetrocking over it.
The paneling has to be attached to real studs. Some paneling is glued to furring strips, which are nailed to the studs. That sandwich is rarely solid enough to hold drywall screws long-term. If you can see thin horizontal strips behind the paneling at the edges, you have furring, and the better choice is removal.
The space behind the wall has to be accessible from somewhere. If you ever need to fish wire, replace a leaky pipe, or address a rodent, doing it through both drywall and paneling is twice the work.
When You Should Just Remove It
If the paneling is glued directly to plaster or to old drywall, take it off. The glue is the problem either way, and adding a layer on top does not fix it. You will end up dealing with the glue someday and the longer you wait the harder it gets.
If the paneling has water damage or any soft spots, remove it. Drywall over a moisture issue is a mold farm. The EPA mold remediation guidelines are clear that moisture sources must be addressed before any covering goes back up.
If you have an electrical box that is going to end up too deep behind the new drywall, the cleaner fix is to remove the paneling so you can reset the box flush with the new surface. Box extension rings exist, but stacking them is not great practice and inspectors notice.
Tools and Materials
This is not a fancy tool list. The job is straightforward once you commit to it.
Drywall sheets, 1/2 inch standard. I would not go thinner. The 3/8 inch sheets bend too much over uneven surfaces, and 5/8 inch is overkill unless you need a fire rating.
Drywall screws, 1-5/8 inch coarse thread, minimum. I went with 2 inch on the cedar wall because the paneling was thicker. The math is simple. You need at least 1 inch of bite into the stud after passing through the drywall and the paneling.
Stud finder that handles dense materials. The cheap magnetic ones do not work well through paneling. A good electronic stud finder with a deep scan mode is worth the extra money.
Drywall T-square, utility knife, drywall saw, screw gun or impact driver with a depth-set bit, joint compound, mesh or paper tape, and a 6 inch and 12 inch taping knife.
Step by Step Installation
Find and Mark the Studs
This is the most important step. Run your stud finder across the wall at three different heights. Mark every stud at the floor and the ceiling with a pencil tick. Then snap a chalk line between them so you have a vertical reference.
If the stud finder gives ambiguous results, drill a small pilot hole and probe with a wire. The original paneling nails are sometimes a guide but I have run into walls where the installer missed studs and just toenailed into the floor plate. Do not trust nail patterns alone.
Plan the Sheet Layout
I run sheets horizontally. The seams end up at a more natural eye level and are easier to finish than vertical seams. Stagger the joints so no two sheets meet at the same vertical line.
Measure the wall and figure out where the cuts fall. You want full sheets dominating the wall and any cuts ending in inside corners where they will be tape-covered. Plan around outlets, switches, and windows before you make a single cut.
Cut Around Outlets and Switches
Turn off the breaker. Measure from a fixed reference (the corner of the wall and the floor) to all four sides of each box. Transfer those measurements to your drywall sheet, double-check, then cut with a drywall saw or a router.
I always cut the boxes slightly oversized, maybe 1/8 inch on each side. The cover plate will hide the gap and a snug cut almost always ends up needing rework.
Hang the Sheets
Start at the top. Lift the sheet against the wall with the long edge tight to the ceiling. A second set of hands makes this dramatically easier. Solo, I have used a deadman brace (basically a T-shaped piece of 2x4 cut to ceiling height) to hold the top sheet while I drive the first few screws.
Drive screws through the drywall and paneling into each marked stud. Space them every 12 inches on the field and 8 inches at the edges. Set the screw heads just below the paper surface without breaking through. A depth-set bit makes this consistent.
The bottom sheet goes on next, tight to the top sheet. Leave a small gap at the floor (1/2 inch or so) which the baseboard will cover.
Tape and Mud the Seams
Tape every seam. Mesh tape is faster and forgiving. Paper tape is stronger and gives a flatter joint. I use mesh on butt joints and paper on tapered seams. Apply a first coat of all-purpose joint compound over the tape, let it dry overnight, then sand lightly.
Second coat with a 10 or 12 inch knife, feathering the edges out wider than the first coat. Third coat for the smoothest result. Three coats is the Gypsum Association standard finishing process and skipping the third coat is the most common cause of seams that show after painting.
Dealing with the Lost Half Inch
Adding 1/2 inch of drywall to every wall pushes outlets in 1/2 inch, narrows door openings by 1 inch total, and makes window jambs sit proud. None of these are deal-breakers but you have to plan for them.
Outlets and switches need spacer rings or longer mounting screws. Spacer rings from any hardware store run about $1 each. Get them before you start.
Door trim and baseboards have to come off and go back on. The new drywall edge needs to terminate behind the trim. If you do not remove the trim first you will end up with weird overlap that looks like exactly what it is, which is drywall stuck on top of paneling.
Window jambs that were originally flush with the paneling will now sit recessed by 1/2 inch. You have to extend the jamb with a thin strip of trim or live with the look. My basement window is just slightly recessed and you barely notice it.
What Went Wrong on My Hallway Project
The hallway with the cheap 1/4 inch grooved paneling was a different story. The paneling was glued and nailed. I did not check carefully enough and assumed it was solid. About three months after I finished the drywall, one section developed a hairline crack along a vertical seam that I could not get to stop coming back.
Turned out the paneling behind that section had pulled slightly away from the stud, and the drywall was flexing every time someone walked heavily in the room above. The fix involved cutting out a strip of the new drywall, driving long screws through the paneling into the stud to pin it back tight, then re-patching and re-taping.
The lesson is to push hard on every section of paneling before you commit. If anything moves or feels hollow, fix it before you cover it. Once it is buried under drywall, every fix is twice the work.