Abstract: Generating 360-degree panoramas from narrow field of view (NFoV) image is a promising computer vision task for Virtual Reality (VR) applications. Existing methods mostly assess the generated panoramas with InceptionNet or CLIP based metrics, which tend to perceive the image quality and is $\textbf{not suitable for evaluating the distortion}$. In this work, we first propose a distortion-specific CLIP, named Distort-CLIP to accurately evaluate the panorama distortion and discover the $\textbf{``visual cheating''}$ phenomenon in previous works (i.e., tending to improve the visual results by sacrificing distortion accuracy). This phenomenon arises because prior methods employ a single network to learn the distinct panorama distortion and content completion at once, which leads the model to prioritize optimizing the latter. To address the phenomenon, we propose $\textbf{PanoDecouple}$, a decoupled diffusion model framework, which decouples the panorama generation into distortion guidance and content completion, aiming to generate panoramas with both accurate distortion and visual appeal. Specifically, we design a DistortNet for distortion guidance by imposing panorama-specific distortion prior and a modified condition registration mechanism; and a ContentNet for content completion by imposing perspective image information. Additionally, a distortion correction loss function with Distort-CLIP is introduced to constrain the distortion explicitly. The extensive experiments validate that PanoDecouple surpasses existing methods both in distortion and visual metrics.