The direct and interactive effects of neuroticism and stressful life events (chronic and episodic stressors) on the severity and temporal course of depression symptoms were examined in 826 outpatients with mood and anxiety disorders, assessed on 3 occasions over a 1-year period (intake and 6- and 12-month follow-ups). Neuroticism, chronic stress, and episodic stress were uniquely associated with intake depression symptom severity. A significant interaction effect indicated that the strength of the effect of neuroticism on initial depression severity increased as chronic stress increased. Although neuroticism did not have a significant direct effect on the temporal course of depression symptoms, chronic stress significantly moderated this relationship such that neuroticism had an increasingly deleterious effect on depression symptom improvement as the level of chronic stress over follow-up increased. In addition, chronic stress (but not episodic stress) over follow-up was uniquely predictive of less depression symptom improvement. Consistent with a stress generation framework, however, initial depression symptom severity was positively associated with chronic stress during follow-up. The results are discussed in regard to diathesis–stress conceptual models of emotional disorders and the various roles of stressful life events in the onset, severity, and maintenance of depressive psychopathology.