Depression and diabetes are both serious chronic conditions common in Western cultures. These conditions impart a significant burden on the patients and society. Depression is often comorbid with chronic illness, and past research has found an increased prevalence of depressive symptoms in patients with Type 2 Diabetes Mellitus (T2DM). However, the exact nature and direction of this relationship are unknown. Depression is often thought to be a consequence of diabetes, perhaps due to the burden of chronic illness. Research has also suggested that depression may be a risk factor for development of diabetes, in part due to biochemical changes in depression and in part because of a reduction of health care behaviors in individuals with depression. This paper reviews the literature behind both lines of investigation and includes special diagnostic and clinical considerations for at risk populations. We discuss clinical implications, limitations of current research, and areas of interest for future research.