Affective disorders, including bipolar disorder and major depressive disorder, are highly prevalent throughout the world and are extremely disabling. Diagnostic and Statistical Manual criteria and psychological models strongly implicate cognitive dysfunctions as being integral to our understanding of these disorders. We review the findings from studies that have used neurocognitive tests and functional imaging techniques to explore abnormal cognition in affective disorders. In particular, we highlight the evidence for cognitive dysfunctions that persist into full clinical remission, and the recent trend toward the use of "hot" processing tasks, involving emotionally charged stimuli, as a means of differentiating between the cognitive underpinnings of mania and depression. The clinical relevance of these developments is discussed.