Patients with mild dementia of the Alzheimer's type (DAT), patients with major depression, and normal elderly control subjects were administered a verbal learning task using the selective reminding procedure. Depressed patients were impaired on total recall and the proportion of items retained from one trial to the next without reminding and did not benefit from imagery in retaining items over consecutive trials. The DAT patients were impaired on all measures derived from the test, including storage and recognition memory. With the exception of the ability to benefit from imagery, all of the measures distinguished depressed and mild DAT patients. These findings are consistent with deficient encoding in DAT and performance deficits as a function of effortful cognitive processing in depression.