The so-called “insight paradox” posits that among patients with schizophrenia higher levels of insight are associated with increased levels of depression. Although different studies examined this issue, only few took in account potential confounders or factors that could influence this association. In a sample of clinically stable patients with schizophrenia, insight and depression were evaluated using the Scale to assess Unawareness of Mental Disorder and the Calgary Depression Scale for Schizophrenia. Other rating scales were used to assess the severity of psychotic symptoms, extrapyramidal symptoms, hopelessness, internalized stigma, self-esteem, and service engagement. Regression models were used to estimate the magnitude of the association between insight and depression while accounting for the role of confounders. Putative psychological and sociodemographic factors that could act as mediators and moderators were examined using the PROCESS macro. By accounting for the role of confounding factors, the strength of the association between insight into symptoms and depression increased from 13% to 25% explained covariance. Patients with lower socioeconomic status (F = 8.5, P = .04), more severe illness (F = 4.8, P = .03) and lower levels of service engagement (F = 4.7, P = .03) displayed the strongest association between insight and depression. Lastly, hopelessness, internalized stigma and perceived discrimination acted as significant mediators. The relationship between insight and depression should be considered a well established phenomenon among patients with schizophrenia: it seems stronger than previously reported especially among patients with lower socioeconomic status, severe illness and poor engagement with services. These findings may have relevant implications for the promotion of insight among patients with schizophrenia.