This study demonstrates a conceptual linkage between exchange theory and psychoanalytic theory of depression. The effects of diminished resources and the dynamic relationships between depression, quality of the marital relationship, and social participation were investigated with a sample of 229 community residing, married older people (Duke Longitudinal Study) using a combined structural and measurement model with linear structural relations (LISREL) analysis. Findings are that some resources have direct effects on depression, marital quality, and social participation. However, it is through the pathway of depressive moods that ill health, retirement, and stress have their negative effects on the marital relationship. Depressive moods do affect social participation, but psychosomatic symptoms of depression do not affect the amount of social participation nor the marital relationship. Recognizing depressive moods as intervening variables is important because older people tend to deny feeling depressed. Without a conceptual linkage of exchange and depression theories, this pathway would not have been identified.