Although several studies have examined the effects of psychotherapy on chronic depression and dysthymia, no meta-analysis has been conducted to integrate results of these studies. We conducted a meta-analysis of 16 randomized trials examining the effects of psychotherapy on chronic depression and dysthymia. We found that psychotherapy had a small but significant effect ( d = 0.23) on depression when compared to control groups. Psychotherapy was significantly less effective than pharmacotherapy in direct comparisons ( d = − 0.31), especially SSRIs, but that this finding was wholly attributable to dysthymic patients (the studies examining dysthymia patients were the same studies that examined SSRIs). Combined treatment was more effective than pharmacotherapy alone ( d = 0.23) but even more so with respect to psychotherapy alone ( d = 0.45), although again this difference may have reflected the greater proportion of dysthymic samples in the latter. No significant differences were found in drop-out rates between psychotherapy and the other conditions. We found indications that at least 18 treatment sessions are needed to realize optimal effects of psychotherapy. We conclude that psychotherapy is effective in the treatment of chronic depression and dysthymia but probably not as effective as pharmacotherapy (particularly the SSRIs).