To characterize the prevalence and predictors of diagnosed depression among persons with HIV on Medicaid and antidepressant treatment among those diagnosed, and to compare utilization and costs between depressed HIV-infected individuals treated with and without antidepressant medications. Merged Medicaid and surveillance data were used to compare health services utilized by depressed individuals who were or were not treated with antidepressant medications, controlling for other characteristics. The study population comprised Medicaid recipients in New Jersey who were diagnosed with HIV or AIDS by March 1996 and received Medicaid services between 1991 and 1996. Logistic regression and ordinary least squares regressions were employed. Women were more likely and African Americans were less likely to be diagnosed with depression. Women and drug users in treatment were more likely to receive antidepressant treatment. Depressed patients treated with antidepressants were more likely to receive antiretroviral treatment than those not treated with antidepressants. Monthly total expenditures were significantly lower for individuals diagnosed with depression and receiving antidepressant therapy than for those not treated with antidepressants. After controlling for socioeconomic and clinical characteristics, treatment with antidepressant medications was associated with a 24% reduction in monthly total health care costs. Depressed HIV-infected patients treated with antidepressants were more likely than untreated subjects to receive appropriate care for their HIV disease. Antidepressant therapy for treatment of depression is associated with a significantly lower monthly cost of medical care services.