Whether and how the co-occurrence of depression and diabetes in pregnancy may worsen infant development has not been reported. Pregnant women with diabetes and with (n = 34) or without (n = 34) major depressive disorder (MDD) were followed during pregnancy and 6-months postpartum. The MDD subset received randomly assigned treatment with cognitive behavior therapy (CBT) or supportive counseling (SC). Depression severity was measured with the Beck Depression Inventory (BDI); infant developmental outcomes were measured with the Bayley Scales of Infant Development (BSID) and its Behavior Rating Scale (BRS). Infants of women with MDD had lower BRS scores (p = .02). Reduction in depression scores was associated with better infant outcomes on the BSID and BRS (p values <.03). These preliminary findings suggest depression occurring in pregnant women with diabetes is associated with poorer infant development and improvement in prepartum depression is associated with improvement in measures of infant development.