Depression decreases the quality of life and hinders efforts to palliate symptoms of adults with terminal or life-threatening illness. Nevertheless, depression often may go undetected and untreated in palliative care and hospice settings due to a number of factors, including the overlap of depressive symptoms with those of serious medical illness and concern that frail elderly patients cannot tolerate psychotherapy or antidepressant treatment. In this paper we review the available research regarding assessment and treatment of depression in older adults with terminal or life-threatening illness, focusing on patients who are seen in palliative care, cancer treatment, or hospice settings. Although the prevalence of depression is relatively high in these settings in mixed-age adult samples, studies focused exclusively on older adults are rare and there appear to be no randomized controlled trials of psychotherapy conducted to date that specifically address their needs. There are, however, promising psychological approaches featured in case reports and pilot studies that are consistent with empirically supported therapies for the general treatment of depression in older adults. Based on these preliminary findings and reports, we offer tentative recommendations for the assessment and treatment of depression in terminally ill older adults. We conclude that controlled research on psychotherapy for late-life depression is both feasible and urgently needed in palliative care, cancer care, and hospice settings.