The early onset of depression following traumatic brain injury (TBI) is associated with poorer psychosocial outcomes; however, the direction of this relationship is unclear. This study investigated the relationship between progress in resuming preinjury lifestyle (transition events), change in perceived functioning and level of depressive symptoms at discharge and 3-months postdischarge. As part of a prospective longitudil study of brain injury outcomes, 96 consecutively discharged patients with TBI completed measures of transition events (Sentinel Events Questionire) and perceived functioning (Mayo-Portland Adaptability Inventory-4 Ability and Adjustment indices) at discharge and 3-months follow-up. Level of depressive symptoms was assessed at discharge and 3-months follow-up using the Depression Anxiety Stress Scale 21. After controlling for age and discharge depressive symptoms, change in perceived functioning was found to mediate the relationship between total transition events and depressive symptoms at 3-months postdischarge (ߠreduced from .21 to .14), with a significant indirect effect observed. The present findings indicate that lack of progress in resuming preinjury lifestyle contributes to postdischarge depressive symptoms through an influence on perceived functioning, thus providing an improved conceptualization of reactive depression in the context of brain injury.