Background: Major depressive disorder is associated with a reduced ability to attend and concentrate, however, the extent to which attentional impairment is dependent on subtype remains to be clarified. Methods: Event-related potentials (ERPs) associated with a well-validated auditory oddball, selective attention task, were recorded to determine the impact of melancholia (n = 57) versus non-melancholia (n = 48) relative to controls (n = 116). Results: The key findings were an exaggeration of the P200 to both non-target and target stimuli and a reduction in the P300 to targets in patients with melancholia, relative to patients with non-melancholia and controls. In addition, the N200/P300 complex was slowed in latency corresponding to the slowed behavioural responses to targets in melancholia. Stepwise regression analysis also revealed that depression severity, but not psychomotor slowing, contributed to increases in P200 amplitude. Limitations: This study is cross-sectional and cannot determine whether the observed ERP changes are a state or trait marker, highlighting the need for a longitudinal study of ERP characteristics in different subgroups of depressed patients. Conclusions: Results point to a difficulty in differentiating significant stimuli in the environment in the depressed individual. The combined disruption of early sensory processing (P200) and subsequent context processing (N200/P300 complex) may provide a potential mechanism for the attentional impairment that is frequently observed in depression, particularly in more severe depression.