Depressed mood has a complex relationship with self-evaluation of personal competence in multiple populations. The absence of depression may be associated with overestimation of abilities, while mild depression seems to lead to accurate self-assessment. Significant depression may lead to underestimation of functioning. In this study, we expand on our previous work by directly comparing the association between different levels of depression, everyday functioning, cognitive and functional capacity performance, and self-assessment of everyday functioning in a large (n = 406) sample of outpatients with schizophrenia. Participants with very low self-reported depression overestimated their everyday functioning compared with informant reports. Higher levels of depression were associated with more accurate self-assessment, but no subgroup of patients underestimated their functioning. Depressive symptom severity was associated with poorer informant-rated social functioning, but there were no differences in vocational functioning, everyday activities, cognitive performance, and functional capacity associated with the severity of self-reported depression. There was minimal evidence of impact of depression on most aspects of everyday functioning and objective test performance and a substantial relationship between depression and accuracy of self-assessment.