This study examined the extent to which the presence of comorbid anxiety disorder affected the course of depression. 650 depressed outpatients visiting general medical clinicians and mental health specialists were followed for 1 or 2 years. All types of anxiety increased the probability of a new depressive episode among patients with subthreshold depression. Co-occurring panic and phobia decreased the likelihood of remission. The initial number of depressive symptoms was greatest among depressed patients with comorbid anxiety and this relatively higher level persisted over two years. The findings emphasize the poor clinical prognosis associated with comorbid anxiety disorder.