Abstract Major depressive disorder is a leading cause of disability and significant mortality, yet mechanistic understanding remains limited. Over the past decade evidence has accumulated from case-control studies that depressive illness is associated with blunted reward activation in the basal ganglia and other regions such as the medial prefrontal cortex. However it is unclear whether this finding can be replicated in a large number of subjects. The functional anatomy of the medial prefrontal cortex and basal ganglia has been extensively studied and the former has excitatory glutamatergic projections to the latter. Reduced effect of glutamatergic projections from the prefrontal cortex to the nucleus accumbens has been argued to underlie motivational disorders such as depression, and many prominent theories of major depressive disorder propose a role for abnormal cortico-limbic connectivity. However, it is unclear whether there is abnormal reward-linked effective connectivity between the medial prefrontal cortex and basal ganglia related to depression. While resting state connectivity abnormalities have been frequently reported in depression, it has not been possible to directly link these findings to reward-learning studies. Here, we tested two main hypotheses. First, mood symptoms are associated with blunted striatal reward prediction error signals in a large community-based sample of recovered and currently ill patients, similar to reports from a number of studies. Second, event-related directed medial prefrontal cortex to basal ganglia effective connectivity is abnormally increased or decreased related to the severity of mood symptoms. Using a Research Domain Criteria approach, data were acquired from a large community-based sample of subjects who participated in a probabilistic reward learning task during event-related functional MRI. Computational modelling of behaviour, model-free and model-based functional MRI, and effective connectivity dynamic causal modelling analyses were used to test hypotheses. Increased depressive symptom severity was related to decreased reward signals in areas which included the nucleus accumbens in 475 participants. Decreased reward-related effective connectivity from the medial prefrontal cortex to striatum was associated with increased depressive symptom severity in 165 participants. Decreased striatal activity may have been due to decreased cortical to striatal connectivity consistent with glutamatergic and cortical-limbic related theories of depression and resulted in reduced direct pathway basal ganglia output. Further study of basal ganglia pathophysiology is required to better understand these abnormalities in patients with depressive symptoms and syndromes.