Distinguishing between cognitive deficits seen in depression and progressive dementing, diseases is complex and often difficult clinically. We review recent neuropsychological studies comparing normal elderly individuals, depressed patients, and patients with progressive dementias. Findings from these studies suggest that the distinction between depression and dementia is fairly straightforward and facilitated by neuropsychological evaluation. Data from neuroimaging studies of depressed elderly are reviewed and integrated with the neuropsychological findings. A descriptive scheme for categorizing elderly patients is proposed. It is suggested that the label "pseudodementia" be discarded in favor of more thorough description of cognitive deficits associated with various clinical presentations.