If you are tired of living with outdated "wood" veneer paneling, paint over the paneled walls in your home. This requires preparation and attention to detail or your results will not be worth your effort. Spend the time to prepare your surface, and the finished result will be picture perfect. Preparation involves several steps, and will vary depending on your desired result, the original finish and the condition of the surface.
Inspect and measure the surface area of your project to estimate supplies needed. If your surface has any stains, you will need to use a special primer designed for that purpose (BIN or Kilz). If your surface has an oil varnish, you will need an oil-based primer; otherwise use a latex one. (You can use latex paint after either primer.) Buy a little more paint and primer than you need. It is better to over-estimate, since you may need more than you think and touch-ups may be needed in the future.
Remove all switch plates, wall plates and anything else screwed to the wall. Tape all edges with painter's tape to avoid "bleeding" onto adjacent surfaces.
Clean the surface using a dilute solution of TSP, or diluted liquid soap, and a clean rag. This will remove any grease and prepare the surface for sanding and priming. Do not make the surface too wet, since it must dry before sanding.
Repair the surface if it is pitted or has large holes. Glue down any raised veneer and fill holes with wood filler. To smooth out the surface, you can use drywall "mud" or caulking to fill in the grooves between panels. If the paneling is narrow or the surface has architectural details, then you may wish to leave it as is, since this is a labor-intensive step. (Consider making the grooves part of your paint design.)
Sand all surfaces. If you have used wood filler or caulking, you will first need to use coarse sandpaper to sand down the filler and make the surface completely level. Use medium sandpaper to scuff the rest of the surface so that the paint and primer will adhere properly. Sand all edges, including ones that you think may not be visible. Remove all dust from the surface with a tack cloth.
Priming and Painting
Paint a light coat of primer all over the surface using a small paint brush for edges and detail, and a roller or paint pad for larger surfaces. Priming is necessary to ensure that the new paint will "stick," particularly if you have a shiny or varnished surface. Let it dry to the touch and then paint a second light coat. It is preferable to use two light coats rather than one heavy one, to avoid drips and sagging.
Sand lightly over the whole surface with fine sandpaper once the primer has dried completely. Remove all dust with a tack cloth.
Paint one light coat of good quality paint with a clean paintbrush and roller. Let it dry completely, then paint another coat. If your finish is not optimum, another light coat may be necessary. The choice of paint will partly determine this, so choose a paint with good "hiding" properties.
Replace all hardware once the paint has dried completely. Consider buying new switch plates to highlight your hard work. Clean your work area.