Event related potentials (ERP) are generated in response to a distinct episode such as when a sensory stimulus is present or there is cognitive reaction for such a stimulus. The electrical potentials generated from such motor, sensory or cognitive events are called electroencephalographic (EEG) fluctuation. Electrically, these are the reflection of the combined activity of postsynaptic potentials generated by huge number (measuring thousands or millions in number) of cortical pyramidal neurons which are oriented in a similar manner and are firing in synchrony. Among all the event related potentials, the best studied has been that of the positive wave arising at around 300 ms, popularly known as the P300. The P300 is the positive wave appearing at about 300 ms after presentation of stimulus. This ERP component was first explained by Sutton et al. and is extensively examined in relation to neurophysiological evaluation of cognitive functions. They described this waveform in terms of amplitude, polarity and latency. Many studies have reported that depressed individuals have distinctive cognitive impairment. The impact of these findings was such that the cognitive impairment of decreased ability to concentrate has become one of the nine core DSM-IV diagnostic criteria for major depressive disorder as a characteristic feature of syndromal depression. Perhaps next to schizophrenia, depression has been the most studied psychiatric condition to be evaluated with P300. So far, more than 20 studies have analysed the P300 component in depressed individuals and have unanimously pointed that depression causes an attenuated P300 response for different stimulus types and sensory modalities-auditory tones, geometric shapes, alphanumeric characters, nonsense syllables and photographs. The use of P300 in depression has been mainly for two purposes- 1) Diagnostic and 2) Prognostic. In this review, we will elaborate these findings of P300 in depression and their applications.