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In animal breeding programs, selection coupled with a narrow genetic base can cause high levels of inbreeding to occur rapidly (in one or two generations). Although the effects of inbreeding have been studied extensively in terrestrial animals and to a lesser extent in aquaculture species, little is known about the effects of inbreeding on penaeid shrimp. The objective of this study was to investigate the effects of inbreeding on hatchery and growout performance of the Pacific white shrimp, Penaeus vannamei. The experiment was conducted over 2 yr, and data from two successive generations (G2 and G3) of inbred (sibling–sibling mating) and outbred families were analyzed. There were 11 inbred and 12 outbred families in G2 and 9 inbred and 10 outbred families in G3. Inbreeding coefficients (F) for outbred and inbred families were 0.00 and 0.25, respectively, for G2 and 0.00 and 0.375, respectively, for G3. Growth rates for outbreds and inbreds were similar in both G2 and G3. Hatch rate for inbred families was 33.1% lower than for outbred families in G2 and 47.1% lower in G3. Inbreeding depression (IBD) (relative change in phenotype per 0.1 increase in F) ± 95% CI for hatch rate was −12.3 ± 10.1%. Hatchery survival for inbred families was 31.4% lower than for outbred families in G2 and 38.8% lower in G3. IBD for hatchery survival was −11.0 ± 5.7%. Growout survival was 1.9% lower for inbred families than for outbred families in G2 and 19.6% lower in G3. IBD for growout survival was −3.8 ± 2.9%. There was also a significant linear relationship between IBD estimates for survival traits and mean outbred survival. At high outbred survival, IBD was low (e.g., growout survival in G2), but IBD appeared to become more severe when outbred survival was lower. This suggests that stress (related to environment and/or life stage) may worsen IBD for survival traits. Results also indicate that moderate to high levels of inbreeding (>10%) should be avoided in commercial shrimp hatcheries because the cumulative effect of IBD on hatch rate and hatchery survival will significantly reduce postlarvae production. Thus, IBD can be significant enough to justify the use of inbreeding as a germplasm protection strategy (under certain scenarios) for genetic improvement programs.