In order to explore neural activity that accompanies cognitive bias in mood disorders, the authors had clinically depressed and nondepressed controls complete a self-evaluation procedure in which they indicated whether trait words were self-descriptive. Dense-array (256-channel) electroencephalography was recorded. Greater depression and low Positive Affect were associated with decreased endorsement of favorable (Good) traits, and greater anxiety and high Negative Affect were associated with increased endorsement of unfavorable (Bad) traits. For controls, the event-related potential (ERP) showed an enhanced visual N1 for trials in which Bad traits were endorsed. For depressed participants, this N1 was attenuated, specifically for these endorsed Bad trials. A similar pattern was observed in the P2-medial frontal negativity (P2-MFN) complex, with controls showing an enhanced MFN to the endorsed Bad words, while depressed participants showed an attenuated or absent medial frontal response on these items specifically. Distributed linear-inverse source analysis of the ERP localized the N1 effect to the inferotemporal-occipital cortex and the medial frontal effect to the dorsal anterior cingulate cortex. The altered ERP responses in depressed participants may provide clues to the neurophysiological processes associated with negatively biased cognition and self-evaluation in clinical depression.