Depression is a prevalent, heterogeneous, and debilitating disorder that often emerges in adolescence, and there is a need to better understand vulnerability processes to inform more targeted intervention efforts. Psychophysiological methods, like event‐related potentials (ERPs), can offer unique insights into the cognitive and emotional processes underlying depression vulnerability. I review my and others' research examining ERP measures of reward responsiveness in youth depression and present a conceptual model of the development of low reward responsiveness, its role in depression vulnerability, and potential windows for targeted intervention. There is evidence that a blunted reward positivity (RewP) is observable in children at risk for depression, appears to be shaped in part by early social experiences, and predicts later depressive symptoms in combination with other risk factors like stress exposure. Further, a component consistent with RewP is reliably elicited in response to social acceptance feedback in computerized peer interaction tasks and demonstrates unique associations with social contextual factors and depressive symptoms, supporting the utility of developing psychophysiological tasks that may better capture youths' real‐world experiences and social risk processes. In addition, I address the translational implications of clinical psychophysiological research and describe a series of studies showing that a reduced RewP predicts greater reductions in depressive symptoms with treatment but is not modifiable by current treatments like cognitive behavioral therapy. Finally, I describe our preliminary efforts to develop a positive emotion‐focused intervention for the offspring of depressed mothers, informed by the RewP literature, and describe future directions for translating psychophysiological research to intervention and prevention.