Policy-makers have long suspected that greater barriers to care result in depressed rural residents being less likely to receive high-quality treatment. This study recruited 470 depressed community residents in a 1992 telephone survey, followed 95 percent of them through one year, and abstracted additional data on their health care utilization from insurance claims, medical and pharmacy records. Bivariate and multivariate models demonstrated that during the year following the baseline, there were no significant rural-urban differences in the rate (probability of any outpatient depression treatment), type (probability of receiving general medical depression care only), or quality (completion of guideline-concordant acute-stage care) of outpatient depression treatment. Annual expenditures for outpatient depression treatment were lower for rural subjects compared with their urban counterparts. Rural subjects had 3.05 times the odds of being admitted to a hospital for physical problems and 3.06 times the odds of being admitted to a hospital for mental health problems during the year following baseline compared with urban subjects. Cost-offset analyses demonstrate that every dollar invested in depression treatment was associated with a $2.61 decrease in the cost of treating physical problems in depressed rural residents. Limited insurance coverage and limited availability of services were the most significant barriers to specialty and general medical outpatient treatment for depression in both rural and urban residents. More than 80 percent of depressed residents in both rural and urban areas visited a primary care provider during the year following baseline. The potential cost offset of depression treatment in rural populations plus the improvement in productivity observed in both rural and urban populations indicate that it may be economically possible to improve quality of care for depression without bankrupting an already strained health care budget.