The perception of the effectiveness of instrumental actions is influenced by depressed mood. Depressive realism (DR) is the claim that depressed people are particularly accurate in evaluating instrumentality. In two experiments, the authors tested the DR hypothesis using an action-outcome contingency judgment task. DR effects were a function of intertrial interval length and outcome density, suggesting that depressed mood is accompanied by reduced contextual processing rather than increased judgment accuracy. The DR effect was observed only when participants were exposed to extended periods in which no actions or outcomes occurred. This implies that DR may result from an impairment in contextual processing rather than accurate but negative expectations. Therefore, DR is consistent with a cognitive distortion view of depression.