A functional polymorphism of the brain-derived neurotrophic factor, BDNF Val66Met, is associated with risk for major depression alongside impairments in memory and selective attention. This study aims to identify the mediating neural mechanisms in links between BDNF and depression using highly heritable electroencephalographic (EEG) recordings. In 305 healthy subjects, BDNF Val66Met genotypes were compared in terms of trait depression, neural function (EEG during a resting state) and cognitive performance. The mediating effects of the EEG brain imaging endophenotypes were also examined using structural equation (path) modeling. A genotype-endophenotype-phenotype path model showed that Met homozygosity predicted elevated working memory commission errors and altered EEG activity; that is elevated relative theta and delta power coupled with reduced alpha power. In turn, reduced EEG alpha activity mediated the relationship between the Met/Met genotype and trait depression. These findings demonstrate the utility of an integrative endophenotype approach. They suggest that the BDNF Met/Met homozygote has a direct impact on memory systems, but impacts trait depression via the secondary effects of neural changes.