--- - |2+ Background Major depressive disorder (MDD) is associated with social cognitive deficits (e.g., poor affect recognition and impaired theory of mind). However, the contribution of social cognitive issues to psychosocial dysfunction in MDD (e.g., occupational functioning and interpersonal relationships) has not been investigated. The current study evaluated the relationship between specific social cognitive domains (e.g., prosody interpretation) and psychosocial dysfunction in subjects with lifetime MDD, as well as currently depressed, remitted, and healthy controls (HCs) subjects. Method Data were obtained from 213 participants in the Cognitive Function and mood study (CoFaMS), a cross‐sectional study of mood, social cognition, cold cognition, and psychosocial functioning in mood disorders. Participants’ (current MDD n = 42, remitted MDD n = 69, and HCs n = 102) social cognitive abilities were assessed using the Social Perception subtest of the Wechsler Adult Intelligence Scale, and psychosocial dysfunction was clinically evaluated with the Functioning Assessment Short Test (FAST). Results The results indicated that prosody interpretation, but not facial affect or meaning interpretation, was associated with psychosocial dysfunction in subjects with lifetime MDD, as well as remitted MDD subjects relative to HCs. In contrast, social cognition was not associated with functioning in participants with current MDD or in HCs. Conclusions These results suggest that the relationship between social cognition and psychosocial functioning differs between the acute and remitted stage of illness in MDD, and that prosody interpretation should be considered a treatment target in patients with residual psychosocial issues. - Depression and Anxiety, EarlyView.