Recent evidence suggests that a state of good mental health is associated with biased processing of information that supports a positively skewed view of the future. Depression, on the other hand, is associated with unbiased processing of such information. Here, we use brain imaging in conjunction with a belief update task administered to clinically depressed patients and healthy controls to characterize brain activity that supports unbiased belief updating in clinically depressed individuals. Our results reveal that unbiased belief updating in depression is mediated by strong neural coding of estimation errors in response to both good news (in left inferior frontal gyrus and bilateral superior frontal gyrus) and bad news (in right inferior parietal lobule and right inferior frontal gyrus) regarding the future. In contrast, intact mental health was linked to a relatively attenuated neural coding of bad news about the future. These findings identify a neural substrate mediating the breakdown of biased updating in major depression disorder, which may be essential for mental health.