Background: Depression in older adults is associated with neuropsychological dysfunction, fronto-subcortical brain changes and sleep disturbance. Research suggests that adequate sleep is critical for many aspects of cognition including processing speed, verbal skills and memory. However, the association between sleep disturbance and neuropsychological functioning in depression has not been well evaluated. The current study therefore aimed to investigate these relationships. Methods: Forty-eight people (mean age = 59.6, sd = 8.2) meeting DSM-IV criteria for unipolar major depression were included for analysis. Neuropsychological assessment included assessment of processing speed, learning and memory, verbal fluency and executive functions. Early and late insomnia were defined by scores on the Hamilton Depression Rating Scale. Results: While early insomnia was related to depression severity and poorer global cognition, late insomnia was associated with later age of depression onset, depression severity, and poorer scores on tests of verbal fluency and memory. The associations between cognition and late insomnia were not accounted for by depression severity or age of onset of disorder. Limitations: This study was retrospective in nature, and did not include objective measures of sleep. Conclusions: This is the first known study to indicate that late insomnia in older people with major depression may be independently and aetiologically linked to neuropsychological performance, particularly verbal fluency and memory. It may also indicate underlying structural and neurochemical changes. Sleep and circadian disturbance may serve as a biomarker for ongoing cognitive decline and may be a potentially modifiable risk factor.