The aim of the study was to explore the association between functional outcomes and mismatch negativity (MMN) activity in participants with mood disorders. The study participants were 27 subjects with major depressive disorder (MDD), 29 subjects with bipolar disorder (BD), and 33 healthy controls who performed a passive auditory oddball paradigm while electroencephalography (EEG) was recorded. Peak amplitudes and source activity of the MMN were compared across groups. Mood and anxiety symptoms were evaluated. The functional levels were the lowest in the BD group, followed by the MDD and healthy control groups. The subjects with BD had significantly lower MMN amplitudes at the frontal and frontocentral electrodes than the healthy controls. The source activity of the MMN from the left anterior cingulate cortex, inferior frontal gyrus, and middle frontal gyrus was significantly increased in the BD group compared to the MDD group. Significant correlations were detected between the functional outcomes and MMN amplitudes at frontal and frontocentral sites. The functional outcome was significantly correlated with left frontal regions. In conclusion, MMN activity appears to be a promising candidate as an evaluation tool for functional outcomes in mood disorders.