Depression is associated with impairments to cognition and brain function at any age, but such impairments in the elderly are particularly problematic because of the additional burden of normal cognitive aging and in some cases, structural brain pathology. Individuals with late-life depression exhibit impairments in cognition and brain structural integrity, alongside mood dysfunction. Antidepressant treatment improves symptoms in some but not all patients, and those who benefit may not return to the cognitive and functional level of nondepressed elderly. Thus, for comprehensive treatment of late-life depression, it may be necessary to address both the affective and cognitive deficits. In this review, we propose a model for the treatment of late-life depression in which nicotinic stimulation is used to improve cognitive performance and improve the efficacy of an antidepressant treatment of the syndrome of late-life depression. The cholinergic system is well-established as important to cognition. Although muscarinic stimulation may exacerbate depressive symptoms, nicotinic stimulation may improve cognition and neural functioning without a detriment to mood. While some studies of nicotinic subtype specific receptor agonists have shown promise in improving cognitive performance, less is known regarding how nicotinic receptor stimulation affects cognition in depressed elderly patients. Late-life depression thus represents a new therapeutic target for the development of nicotinic agonist drugs. Parallel treatment of cognitive dysfunction along with medical and psychological approaches to treating mood dysfunction may be necessary to ensure full resolution of depressive illness in aging.