Depressed individuals show hypersensitivity to negative feedback during cognitive testing, which can precipitate subsequent errors and thereby impair a broad range of cognitive abilities. We studied the neural mechanisms underlying this feedback hypersensitivity using functional magnetic resonance imaging (fMRI) with a reversal learning task that required subjects to ignore misleading negative feedback on some trials. Thirteen depressed subjects with major depressive disorder (MDD), 12 depressed subjects with bipolar disorder (BD) and 15 healthy controls participated. The MDD group, but not the BD group, demonstrated enhanced sensitivity to negative feedback compared to controls, as indicated by the rates of rule reversal following misleading negative feedback. In the control and BD groups, hemodynamic activity was significantly higher in the dorsomedial and ventrolateral prefrontal cortices during reversal shifting, and significantly lower in the right amygdala in response to negative feedback. The extent to which the amygdala showed less activity during negative feedback correlated inversely with the behavioral tendency to reverse after misleading feedback. This effect was not present in the MDD group, who also failed to recruit the prefrontal cortex during behavioral reversal. Hypersensitivity to negative feedback is present in unmedicated depressed patients with MDD. Disrupted top-down control by the prefrontal cortex of the amygdala may underlie this abnormal response to negative feedback in unipolar depression.