OBJECTIVE This research examined whether deficits in premorbid functioning are associated with a vulnerability to psychosis in unipolar major depressive disorder. METHODS A group of 92 inpatients with unipolar major depression were assessed for premorbid functioning and psychotic symptoms during an index hospitalization. They were prospectively assessed for psychotic symptoms 2.0 and 4.5 years after hospital discharge. RESULTS The psychotic depressed patients had significantly poorer premorbid functioning--particularly, adolescent social functioning--than the nonpsychotic depressed patients. Longitudinal analyses indicated that poor premorbid social adaptation was significantly associated with the emergence of psychosis during the follow-up period in depressed patients who had not been psychotic as inpatients. CONCLUSIONS Factors related to a vulnerability to psychosis among patients with major depression are present even years before the onset of overt psychotic symptoms. The data could support the view that impaired premorbid functioning is one manifestation of prepsychotic processes that constitute an underlying diathesis for psychotic episodes during the longitudinal course of unipolar major depression. These findings are consistent with other emerging findings pointing to early developmental deficits in patients who subsequently develop psychotic disorders.