Major depression with psychotic features (MDpsy), a disorder with considerable morbidity and mortality, is more common than is generally realized and is a most difficult form of depression to treat. Patients with MDpsy exhibit more frequent relapses and recurrences and have increased use of services, greater disability, and a poorer clinical course when compared with nonpsychotically depressed patients. Patients with MDpsy demonstrate distinct biological abnormalities in studies of the hypothalamic-pituitary-adrenal (HPA) axis, dopaminergic activity, enzyme studies, brain imaging, electroencephalogram sleep profiles, and measures of serotonergic function when compared with nonpsychotic depression. The social and occupational impairment in MDpsy has been hypothesized to be secondary to subtle cognitive deficits caused by the higher cortisol levels frequently observed in MDpsy patients. Several studies support a relationship between bipolar disorder and MDpsy, particularly in young-onset MDpsy. The most efficacious treatments for MDpsy include the combination of an antidepressant and an antipsychotic, amoxapine, or electroconvulsive therapy. Atypical antipsychotic medications may have particular relevance for the treatment of MDpsy because of the potential for reduced risk of extrapyramidal side effects and tardive dyskinesia, as well as antipsychotic and possibly antidepressant qualities. Based on the observations that MDpsy patients exhibit marked dysregulation of the HPA axis and elevated cortisol levels, several antiglucocorticoid strategies have been employed to treat MDpsy patients. Many questions regarding the acute and long-term treatment of MDpsy remain for future studies to address.