Background: Studies in adults with major depressive disorder (MDD) document abnormalities in both memory and face-emotion processing. The current study used a novel face-memory task to test the hypothesis that adolescent MDD is associated with a deficit in memory for face-emotions. The study also examines the relationship between parental MDD and memory performance in offspring. Methods: Subjects were 152 offspring (ages 9-19) of adults with either MDD, anxiety disorders, both MDD and anxiety, or no disorder. Parents and offspring were assessed for mental disorders. Collection of face-memory data was blind to offspring and parent diagnosis. A computerized task was developed that required rating of facial photographs depicting "happy," "fearful," or "angry" emotions followed by a memory recall test. Recall accuracy was examined as a function of face-emotion type. Results: Age and gender independently predicted memory, with better recall in older and female subjects. Controlling for age and gender, offspring with a history of MDD (n = 19) demonstrated significant deficits in memory selectively for fearful faces, but not happy or angry faces. Parental MDD was not associated with face-memory accuracy. Discussion: This study found an association between MDD in childhood or adolescence and perturbed encoding of fearful faces. MDD in young individuals may predispose to subtle anomalies in a neural circuit encompassing the amygdala, a brain region implicated in the processing of fearful facial expressions. These findings suggest that brain imaging studies using similar face-emotion paradigms should test whether deficits in processing of fearful faces relate to amygdala dysfunction in children and adolescents with MDD.