How to Cover Wood Paneling
Before you cover wood paneling, make sure to inspect the paneling for any defects like mildew or warping, which might mean you will need to tear it out. If you are unsure about the condition of the paneling, call a professional for an inspection. If the paneling is in good condition, clean it with mild dish soap and water and then sand it with a medium grit sandpaper. After it has been sanded, apply primer and paint the paneling for a fresh new look.
Inspect the paneling for defects. If the panels are not in good shape, they will continue to deteriorate under the covering. If there is major mildew or warping, tear down the panels instead. If a panel is coming away from the wall, nail it down in the groove. If you are reluctant to tear down the paneling, pay for a professional inspection. Some problems can be fixed by cleaning or replacing a few panels, but some damage is irreversible. Clean the panels. If your panels are fairly clean, you can get away with water and mild detergent. Dirty walls may need a commercial degreaser to prepare the surface for paint, followed by a thorough water rinse. Degreasers can be dangerous to skin and lungs, so follow label instructions carefully. TSP (trisodium phosphate) is an effective choice, but it is banned in some areas for environmental reasons. If you want an environmentally friendly cleaner, you might try using a brand like Simple Green. Push the panels. If the panels flex or depress when pushed, filling the grooves between them is not recommend. This movement will cause the filling to crack over time. You can paint over the panels without filling, but the grooves will still be visible.  If your panels are solid lumber (not plywood), prime the area with a joint compound (such as the kind you would use for drywall) before filling the grooves. If you don't, any filling you put in the grooves will eventually crack or fall out. Choose an approach. You can either paint over your panels or hang wall liner over them. Wall liner is an extra-sturdy wallpaper that will cover but not hide the grooves in your paneling. Alternatively, you can decorate wood panels with bookshelves, drapes, or art to minimize their appearance. Prepare the area. Move all furniture well away from the paneling, and cover the floor with drop cloth. Gloves and a face mask are recommended, especially if you're working with a large area or in a room with poor ventilation. Check all product labels for safety information. Ventilate the room with open windows or fans. Sand away the finish. Most paneling has a glossy finish, which needs to be roughened up for the primer. Scuff up the wood a little with a medium grit sandpaper, around 150 grit. Wipe away dust with a damp cloth. Always wear a dust mask while sanding. You can rub on a deglosser instead. This is faster, but you'll have to work one panel at a time, priming as soon as the deglosser dries to the correct consistency. Check product label for details. If you cleaned the panels with TSP, you might be able to skip this step. An additional light sanding or deglossing is still a good idea. If you do not sand away the finish, you should use an oil-based primer instead, as this will be easier for the paint to adhere to. Apply primer. Coat the surface thinly and evenly with an oil- or latex-based primer. If the roller can't reach into the grooves, prime them with a paintbrush. Let dry for 24 hours or the time recommended on the label. Some real lumber panels will bleed resin through the paint. Prevent this with a stain blocking primer. A tinted primer contributes to the final color. Fill grooves with drywall joint compound (optional). Do this only if your boards are rigid enough to handle this (as described above), and you want to hide the groove texture. Mix a standard drywall joint compound "mud" with a power mixer or hand tool. You can also buy a pre-mixed compound. Spread it over the grooves in a thin layer with a putty knife, then let dry overnight. If necessary — and it usually is — apply another thin coat or two, until the compound is flush with the panel surface. Let each coat dry overnight. After the final coat is dry, sand it down with a fine-grit sandpaper. If you have it handy, add a sprinkle of quick-setting joint compound when mixing your mud. This helps speed up the drying. Too thick a coat can warp your paneling. Fill in holes and dents. If there are any holes in your panels, fill them with spackle. If you are filling the grooves with joint compound, you may use it for these holes as well. Paint the panels. Roll on at least two coats of paint, letting dry and sanding lightly in between. Use a foam sponge roller to avoid unwanted textures. Once you're satisfied with the look, you're finished. If you didn't fill the grooves, use a brush to paint in between the panels. Choose your wall liner. Wall liner, also sold as bridging material, is a heavy-duty covering that stays flat across the gaps between panels without sagging or blistering. Most wall liners are designed to have wallpaper plastered over them, but some are paintable. For most walls in good condition, a medium-grade (1200 rating) lining paper is a good choice. Pre-pasted wall liners are the easiest to use for a beginner. If you have some wallpapering experience, you might prefer an unpasted version. Patterned wall liners are available, but most are blank. Prepare the wood surface. Clean the wood surface and let dry. Most finishes will not interfere with adhesion, but check your product info to make sure. If the wood is especially glossy, rough up the finish with medium grit sandpaper. Cut wall liner. Cut lengths of wall liner about 4 inches (10cm) longer than the width of your wall. These horizontal strips are generally best, so the liner seams don't end up in the grooves between panels. For unusually shaped walls, plan out how you will arrange your wall liner so you can cover the wall with as few strips as possible. Coat with adhesive. Pre-pasted liners just need water brushed onto the back to activate the adhesive. For a non-pasted liner, brush the strip generously and evenly with a special liner adhesive, getting right to the edge. Fold the paper accordion-style as you go so it's easy to handle. Typically, you'll need to let the adhesive soak in for about ten minutes. Attach your first strip. Hold the folded liner up against the edge of a wall, and unfold it bit by bit as you go. As you unfold, brush it in place with a wide wallpaper brush, flattening it against the panels. When you reach the last fold, pencil a line where it will hit the edge, cut along the line, then brush it in place. For best results, use a long level to get the first strip as straight as you can. Brushing with too much force will stretch the liner. Cover the rest of the paneling. Put up each strip the same way, leaving a minuscule gap between strips to avoid bumps from overlapping. Let dry. Wall liners usually take 24–48 hours to dry completely. Check product info for a specific estimate. Add the decorative surface. You may now wallpaper the new surface, or paint over it if your liner is paintable. Enjoy your new look! 
Inspect the paneling for defects. Clean the panels. Push the panels. Choose an approach. Prepare the area. Sand away the finish. Apply primer. Fill grooves with drywall joint compound (optional). Fill in holes and dents. Paint the panels. Choose your wall liner. Prepare the wood surface. Cut wall liner. Coat with adhesive. Attach your first strip. Cover the rest of the paneling. Let dry. Add the decorative surface. 