Depression is twice as common in patients with diabetes; it is associated with an increased risk of diabetes complications and premature mortality. However, the mechanisms linking the two conditions are poorly understood and current treatments for depression frequently fail to improve diabetes outcomes. In addition to shared psychological factors, there is increasing evidence that biological mechanisms, such as elevated inflammation, may contribute to a common underlying mechanism for depression and type 2 diabetes. Improved understanding of such mechanisms has identified novel targets for treatment that may improve depression and diabetes simultaneously. In the longer term, such pathways may provide targets to prevent the onset of type 2 diabetes in depression altogether.