Depression and medical comorbidities lead to increased morbidity and mortality and have been associated with higher health care costs. Depressive disorders can adversely impact the course of medical illnesses, whereas medical illnesses can serve as a risk factor for future depressive disorders. This interplay has spurred some interesting exploratory research to understand the common pathophysiology and neurobiologic substrates that may explain the bidirectional relationship between the two disorders. There is a paucity of well-designed, randomized, controlled trials to address some of the treatment-related prognostic issues in this population. However, more recent studies have focused on diagnostic and treatment implications with various available pharmacologic and psychotherapeutic modalities. Early identification and appropriate treatment of depression in the medically ill can positively influence medical outcomes and quality of life. Collaborative care models integrating mental health and primary care providers, combined with patient preference, are found to be cost-effective and may result in better response to depression treatment.