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Major depression in later life is highest among people with chronic illness. Identifying amenable factors that mediate the relationship between known risk factors such as arthritis and heart disease with major depression is important to the design of clinical and public health strategies to reduce depression and its consequences.This study investigates factors amenable to clinical and public health intervention that could mediate the relationship between chronic illness and major depression.Population-based national sample.United States preretirement age (54–65) adults.A total of 7825 participants from the 1996 Health and Retirement Survey.The outcome is major depression based on standardized assessment. Independent variables include sociodemographics chronic illness profile, functional limitation, health and medical access.A substantial burden of major depression is related to chronic illness, particularly arthritis (attributable risk [AR], 18.1%; 95% confidence interval [CI], 9.9–25.6) and heart disease (AR, 17.6%; 95% CI, 13.4–21.7). Functional limitation is the strongest investigated factor associated with depression (AR, 34.4%; 95% CI, 24.8–42.7) and attenuates the associations of arthritis and heart disease with depression.Functional limitation mediates the association of arthritis and heart disease with major depression. This relationship offers potential clinical and public health strategies to reduce major depression in older adults through intervention and management of functional limitation. Alternatively, it might be possible to reduce functional loss through screening for depression, particularly among people with functional limitation, and effective mental health treatment. The importance for clinical management of depression, comorbidity, and functional limitation spectrum supports the value of systems-based medicine.