Depression is very common in patients with dementia but the relationship is very complex. Depression is regarded as a cause of excess disability in persons with dementia and contributes to their functional decline. The assessment of depression in dementia patients, however, has been difficult in that the validity of self-reported depression in patients with dementia has been questioned. This study was done to investigate whether self-reported depression by persons with dementia (using the GDS) is related to their functional abilities as rated by a family caregiver (using the IADL scale) above and beyond demographic variables. This study was conducted at the Detroit Satellite of the Michigan Alzheimer's Disease Research Center. There were 141 participants, 67% were African American and 33% were European American. Statistical analyses included a correlational and multiple regression approach to determine the predictive relationships of cognitive and depressive symptoms above and beyond the influence of demographic variables and cognition. The results of the study further support the notion that depression in dementia is significantly related to functional decline but, more importantly, that self-reported depression in patients with dementia can be valuable information in understanding patients' functioning.