This study explores the role of family functioning in therapeutic change in focused individual psychodynamic psychotherapy (FIPP) and time-limited systems integrative family therapy (SIFT) for depressed children and adolescents. After a screening process, 72 participants aged 8 to 15 were randomized to either FIPP or time-limited SIFT. Assessments took place prior to, at the end of, and 6 months after treatment. Families in both SIFT and FIPP showed a small but significant and sustained improvement in family functioning by the end of treatment in both mothers' self-reports and family therapists' assessments. Better family functioning at baseline in mothers' self-reports and improved family functioning during SIFT, as assessed by family therapists, predicted a sustained decrease in self-reported depressive symptoms. Results indicated that time-limited SIFT may be more effective with younger children and in patients without a diagnosis of double depression than adolescents.