Cognitive impairment and depression each compromise functional status in the elderly, but it is not known whether their coexistence is associated with additive functional impairment. The effect of the presence or absence of a diagnosis of major depression on functional status was examined in a group of 50 community-residing patients with dementia of the Alzheimer's type (DAT). Patients were diagnosed as depressed (N = 20) or not (N = 30) according to DSM-III criteria. Cognitive status was assessed with the Mini-Mental State Exam (MMSE), and functional status was assessed by family report of Instrumental Activities of Daily Living (IADLs). Consistent with previous reports, patients with a depression diagnosis were less cognitively impaired than their nondepressed counterparts. When cognitive status was controlled for, depression diagnosis was found to have a main effect on functional impairment. Although the direction of effects between depression and functional limitations was not determined here, these results suggest that alleviating depression may decrease functional limitations in DAT patients.