Two different and seemingly competing views on the diagnosis of major depressive disorder (MDD) exist. The first is that the diagnosis conflates adaptive sadness reactions with pathological states of depressed mood and that MDD is overdiagnosed and overtreated. The second is that MDD is an underdiagnosed and undertreated disorder, and one that is best characterised by a severe, chronic, recurrent or treatment-resistant course. Existing research suggests that both views are valid and merit being integrated. Anywhere from 30 to 50% of individuals will meet criteria for MDD at some point in their life. About half of these episodes are of brief duration and unlikely to recur. However, a remaining half is either chronic or recurrent. Data on the outpatient diagnosis of depression support the view that depression is simultaneously underdiagnosed and undertreated as well as overdiagnosed and overtreated. About one-third of the patients who meet criteria for MDD and receive placebos experience clinically significant and long-lasting improvement. Many other patients, however, are unresponsive to one or multiple active treatments. Thus, the diagnosis of MDD likely applies to individuals who are experiencing either normal periods of sadness or single-episode afflictions that are mild, unlikely to recur, and are placebo responsive, as well as to individuals with more severe clinical profiles. More research is needed that can help ascertain what contextual or biopsychological variables help distinguish between individuals who may be experiencing adaptive states of negative affect and those who experience severe, chronic, recurrent or treatment-resistant depressions.