To examine neuropsychological functioning as a predictor of psychosocial adjustment difficulties at discharge from a postacute residential rehabilitation facility for traumatic brain injury (TBI) and depression as a potential mediator. A retrospective record review was conducted of 172 adults who received rehabilitation services for TBI. Individuals completed a full battery of neuropsychological tests, depression assessment, and functional assessments at admission. Functional assessments were also obtained at discharge. A two-phase structural equation model analysis was performed. The first phase specified a good fitting model of a cognitive functioning (CF) latent construct with four indicators of cognitive domains measuring verbal fluency, cognitive flexibility, verbal learning, and working memory. Worse CF was associated with greater psychosocial adjustment impairment at discharge, but not related to depression. Psychosocial adjustment impairment at admission was positively associated with depression when controlling for CF, however depression did not predict psychosocial adjustment at discharge. Thus, depression was not found to be a significant mediator of psychosocial adjustment impairment at discharge. Results provide support for neuropsychological functioning at the start of postacute rehabilitation for TBI as an important predictor of psychosocial functioning difficulties that remain upon discharge and highlights the need to examine mechanisms beyond depression.