Diabetes and depression are highly prevalent conditions and have significant impact on health outcomes. This study reviewed the literature on the prevalence, burden of illness, morbidity, mortality, and cost of comorbid depression in people with diabetes as well as the evidence on effective treatments. Systematic review of the literature on the relationship between diabetes and depression was performed. A comprehensive search of the literature was performed on Medline from 1966 to 2009. Studies that examined the association between diabetes and depression were reviewed. A formal meta-analysis was not performed because of the broad area covered and the heterogeneity of the studies. Instead, a qualitative aggregation of studies was performed. Diabetes and depression are debilitating conditions that are associated with significant morbidity, mortality, and healthcare costs. Coexisting depression in people with diabetes is associated with decreased adherence to treatment, poor metabolic control, higher complication rates, decreased quality of life, increased healthcare use and cost, increased disability and lost productivity, and increased risk of death. The coexistence of diabetes and depression is associated with significant morbidity, mortality, and increased healthcare cost. Coordinated strategies for clinical care are necessary to improve clinical outcomes and reduce the burden of illness.