The extent of cognitive deficit in depressed elderly remains unclear. Recent follow-up studies of elderly patients diagnosed as depressed suggest that depression may present as the initial sign of progressive dementia. This raises questions regarding the nature of the depression in those individuals who deteriorate cognitively over time, and encourages the search for clinical indicators of those depressed who are likely to deteriorate. Thirty-five depressed older adult outpatients were comprehensively examined and re-evaluated with a brief neuropsychological battery after one or more years. Twenty-three probable dementia of the Alzheimer's type patients (DAT) provided a comparison with a known progressive disorder. Patients with a decline of four points from their original score on a mental status examination comprised the "depressed with cognitive deterioration" sample (N = 8) and all others made up the "depressed without cognitive deterioration" sample (N = 27). These two samples were then compared on clinical variables from the initial neuropsychological, medical, radiological, and patient history examination. A Multivariate analysis of variance using the following variables: initial age, education, modified Hachinski, initial Mini-Mental State, Wechsler Memory Quotient, vocabulary, digit span, similarities, picture completion, block design, and digit symbol subtests of the Wechsler Adult Intelligence Scale-Revised, initial Geriatric Depression Scale, and Grocery Store Test of verbal fluency failed to differentiate those depressed elderly that declined from those who did not. A series of Chi-square analyses using the medical and radiological variables demonstrated a significant association between depressed with deterioration and magnetic resonance imaging (MRI) abnormalities, computerized tomography (CT) abnormalities, and Electrocardiogram (EKG) abnormalities. Those depressed patients with cognitive deterioration demonstrated a higher frequency of white matter abnormalities on the combined CT and MRI than did those depressed patients with no deterioration. Leuko-araiosis in depressed elderly may represent a clinical marker for the identification of later cognitive deterioration. Results indicate: (1) a need for the development of more sensitive neuropsychological measures for accurate prediction of deterioration; (2) the importance of follow-up neuropsychological evaluations on depressed elderly; (3) relationship between white matter abnormality and cognitive deterioration in depressed elderly, and (4) support for the hypothesis that depression may present as an early sign of a later developing progressive dementia.