In a longitudinal evaluation of 37 patients with severe depression who had undergone brain magnetic resonance imaging (MRI) 6 months-2 years (mean 14.1 months) previously, the degree of residual dysfunction was predicted by the extent of subcortical white matter hyperintensities (WMHS, p < .01), longer time elapsed since the MRI scan (p < .05), older age (p < .05), and older age at onset of affective disorder (p < .05). Ten (27%) patients developed "probable" dementia syndromes of the vascular type, with such syndromes being predicted by WMHS (p < .01) and older age of onset of affective disorder (p < .05). Institutionalization of patients was predicted largely by the combination of chronic depression, progressive cognitive decline, and advanced age. The study supports the notion that a subgroup of patients with late-onset depressive disorders, without a family history of depression, and with risk factors to cerebrovascular disease, have extensive WMHS on MRI, and that such structural brain changes predispose to chronic depression and progressive cognitive decline.