Episodic memories, when reactivated, can be modified or updated by new learning. Since such dynamic memory processes remain largely unexplored in psychiatric disorders, we examined the impact of depression on episodic memory updating. Unipolar and bipolar depression patients, and age/education matched controls, first learned a set of objects (List-1). Two days later, participants in all three groups were either reminded of the first learning session or not followed by the learning of a new set of objects (List-2). Forty-eight hours later, List-1 recall was impaired in unipolar and bipolar patients compared to control participants. Further, as expected, control participants who received a reminder spontaneously recalled items from List-2 during recall of List-1, indicative of an updated List-1 memory. Such spontaneous intrusions were also seen in the unipolar and bipolar patients that received the reminder, suggesting that memory updating was unaffected in these two patient groups despite impaired recall of List 1. Unexpectedly, we observed a trend towards higher intrusions, albeit statistically insignificant, not only in the reminder but also in the no-reminder subgroups of bipolar patients. We probed this further in a second cohort by testing recall of List-2, which was also impaired in both depression groups. Again bipolar patients showed intrusions, but this time in the reverse order from List-1 into List-2, independent of a reminder. Taken together, despite impaired recall, updating of episodic memories was intact and unidirectional in unipolar depression. In contrast, indiscriminate updating, as evidenced by bidirectional interference between episodic memories, was seen in bipolar depression. These findings reveal a novel distinction between unipolar versus bipolar depression using a reactivation-dependent memory updating paradigm.