One hundred patients with "mild" depressive states, variously referred to as "situational," "reactive," or "neurotic," were studied. During a three- to four-year prospective follow-up, 4% had developed bipolar I, 14% bipolar II, and 22% unipolar disorders with predominantly favorable social outcome. Most of the remainder were suffering from nonaffective disorders; in this group, intermittent depressive symptomatology followed a protracted course (paralleling the underlying disorder) with generally unfavorable outcome. Irrespective of diagnostic subtype, a "characterological" component occurring in 24% of the total sample appeared to predict unfavorable prognosis, including three suicides. The diagnostic use of the concept of neurotic depression may no longer be clinically meaningful, since it lacks sufficient phenomenological characterizations and refers to a heterogeneous group of disorders. The data suggest the merits of a biaxial approach to the nosology of depressive disorders whereby phenomenologically based affective diagnoses are qualified as to the presence or absence of character disorder.