Objectives. Life-events that precede the onset of unipolar depression usually involve an appraisal of loss; recent research has shown that where these events are also appraised as humiliating or involving entrapment and defeat (the absence of a way forward or failure to reaffirm an identity) they are especially potent in triggering depression. Depression in schizophrenia has not been studied from the cognitive or psychosocial perspectives, probably because of its confused nosological status. In a previous study we showed that patients' perceived loss of control and entrapment by psychotic illness (e.g. by recurring relapse) was strongly linked to depression. Design. In this study we follow up the original sample of 49 patients 2.5 years later to examine the hypotheses using more powerful prospective methodology. Two of the sample had died of natural causes and the remaining 47 agreed to be reinterviewed. Method. We used the same measures of patients' appraisal of their illness and symptoms in terms of the extent to which they perceive it as embodying loss, humiliation and entrapment. Results. It was found using multivariate analysis that perceived loss of autonomy and social role, particularly employment, were correlated with depression. The appraisal of entrapment in psychotic illness was found to have high cross-sectional and prospective predictive value independent of illness, symptom and treatment variables and was shown to be influenced by certain aspects of psychiatric treatment, particularly compulsory detention. Conclusion. We propose that episodes of depression in schizophrenia are triggered by psychosis-related events (relapse, compulsory admission, residual voices, loss of job, etc.) that signify the inability to overcome the loss of a cherished personal goal or social role and thereby to affirm an identity. Implications for psychological therapy are discussed.