This document describes a method to improve music source separation using panning techniques and discrete wavelet transforms. The proposed method uses similarity measures between discrete wavelet transforms of input signals to identify time-frequency regions occupied by each source based on panning coefficients. Individual music components are identified and extracted by clustering time-frequency components with a given panning coefficient. Performance is evaluated using signal-to-distortion ratio and the proposed method is shown to improve separation compared to existing short-time Fourier transform and fast Fourier transform methods based on results from experiments separating voice signals from three music recordings.