Depression is a common problem in medical outpatients, yet primary care physicians recognize the disorder in only about half of their depressed patients. We compared physician recognition of depression (defined by chart notation or prescription of antidepressants) with diagnoses generated by the Diagnostic Interview Schedule (DIS) in 265 medical outpatients. Using DIS criteria, diagnoses of major depression in the past year or dysthymia (chronic minor depression) were made in 70 patients. Physicians recognized as depressed only 25 (35.7%) of the 70 DIS-depressed patients. However, 36 patients who were not depressed according to DIS were "recognized" as depressed by physicians. Patients misdiagnosed as depressed by physicians were older, less educated, had more outpatient visits, and were prescribed more medications. Receiver operating characteristic curves of two self-report depression scales suggest that these scales may assist physicians in recognizing depressed outpatients. We conclude that physicians underrecognize and misdiagnose depression in medical outpatients.