A potential-based panel method is presented for the analysis of a partially-cavltatlng two-dimensional hydrofoil. The method employs normal dipoles and sources distributed on the foil and cavity surfaces. It is shown that the source plays an Important role in positioning the cavity surface through an iterative process. The cavity closure consition is found very effective in generating the cavity shape. Upon convergence, the method predicts the cavitation nurser, together with the lift, the drag and the surface pressure distribution, for a given cavity length. Systematic convergence tests shows that the present numerical method is fast and stable. The present computations show a good agreement with the previously computed and measured results.