Objectives To evaluate if depression contributes, independently and/or in interaction with frailty, to loss of independence in instrumental activities of daily living (ADL) in older adults with frailty. Methods Longitudinal cohort study of people aged ≥75 years living in the community. We used multi-level linear regression model to quantify the relationship between depression (≥5 Geriatric Depression Scale) and frailty (electronic frailty index), and instrumental activities of daily living (Nottingham Extended Activities of Daily Living scale; range: 0–66; higher score implies greater independence). The model was adjusted for known confounders (age; gender; ethnicity; education; living situation; medical comorbidity). Results 553 participants were included at baseline; 53% were female with a mean age of 81 (5.0 SD) years. Depression and frailty (moderate and severe levels) were independently associated with reduced instrumental activities of daily living scores. In the adjusted analysis, the regression coefficient was -6.4 (95% CI: -8.3 to -4.5, p<0.05) for depression, -1.5 (95% CI: -3.8 to 0.9, p = 0.22) for mild frailty, -6.1 (95% CI: -8.6 to -3.6, p<0.05) for moderate frailty, and -10.1 (95% CI: -13.5 to -6.8, p<0.05) for severe frailty. Moreover, depression interacted with frailty to further reduce instrumental activities of daily living score in individuals with mild or moderate frailty. These relationships remained significant after adjusting for confounders. Conclusion Frailty and depression are independently associated with reduced independence in instrumental activities of daily living. Also, depression interacts with frailty to further reduce independence for mild to moderately frail individuals, suggesting that clinical management of frailty should integrate physical and mental health care.