The role of hippocampal atrophy in the pathogenesis of major depression remains under investigation. Here, we show, within a neural network model, that the incorporation of atrophy reproduces the changes observed in cognitive impairment in depression and could also contribute to the maintenance of the depressed mood. Some other clinical observations, such as treatment resistance and frequent relapses of illness, could also be explained within the framework of the model. We also simulate the action of cognitive therapy and a combined treatment of cognitive therapy and antidepressant drugs. Our findings suggest that, in the presence of hippocampal atrophy, the incorporation of antidepressant drugs would be necessary for the reversal of symptomatology.