Background Despite their high rates of depression, homebound older adults have limited access to evidence‐based psychotherapy. The purpose of this paper was to report both depression and disability outcomes of telehealth problem‐solving therapy (tele‐PST via Skype video call) for low‐income homebound older adults over 6 months postintervention. Methods A 3‐arm randomized controlled trial compared the efficacy of tele‐PST to in‐person PST and telephone care calls with 158 homebound individuals who were aged 50+ and scored 15+ on the 24‐item Hamilton Rating Scale for Depression (HAMD). Treatment effects on depression severity (HAMD score) and disability (score on the WHO Disability Assessment Schedule [WHODAS]) were analyzed using mixed‐effects regression with random intercept models. Possible reciprocal relationships between depression and disability were examined with a parallel‐process latent growth curve model. Results Both tele‐PST and in‐person PST were efficacious treatments for low‐income homebound older adults; however the effects of tele‐PST on both depression and disability outcomes were sustained significantly longer than those of in‐person PST. Effect sizes (dGMA‐raw) for HAMD score changes at 36 weeks were 0.68 for tele‐PST and 0.20 for in‐person PST. Effect sizes for WHODAS score changes at 36 weeks were 0.47 for tele‐PST and 0.25 for in‐person PST. The results also supported reciprocal and indirect effects between depression and disability outcomes. Conclusions The efficacy and potential low cost of tele‐delivered psychotherapy show its potential for easy replication and sustainability to reach a large number of underserved older adults and improve their access to mental health services.