Major depression has been associated with anomalous activation in the subgenual anterior cingulate cortex, but its response to emotional stimuli is poorly understood. The primary goal of this study was to compare levels of activation in the subgenual anterior cingulate cortex of diagnosed depressed and nondepressed participants in response to happy and sad facial expressions of affect. Whereas cognitive theories of depression predict increased activation to negative stimuli, depressed participants were found to exhibit increased activation to both types of stimuli in the subgenual anterior cingulate cortex. Importantly, the loci were in different regions of the subgenual anterior cingulate cortex, suggesting that there is functional specialization in the processing of negatively and positively valenced stimuli.