OBJECTIVES: The efficacy of lurasidone in reducing depression symptoms and improving functioning among patients with bipolar depression has been previously demonstrated. This analysis examines the direct and indirect effect (mediated through improvement in depression symptoms) of lurasidone in improving patient functioning. METHODS: Data from a 6-week, double-blind, placebo-controlled trial assessing the effect of treatment [lurasidone (20–60 mg or 80-120 mg) versus placebo] in bipolar depression was used. Patient functioning was measured using a validated patient reported outcomes scale, Sheehan Disability Scale (SDS), that assessed functioning in work/school, family, and social life (higher scores indicate greater disability). Depression symptoms were measured using the 10-item Montgomery-Asberg Depression Rating Scale (MADRS; higher scores indicate greater severity). Path analyses evaluated total effect (β), as well as the indirect effect (β*β) and direct effect (β) of treatment on SDS change, using standardized beta path coefficients and baseline scores as covariates. The direct effect of treatment on SDS change and indirect effects accounting for mediation through MADRS change was examined for statistical significance and magnitude.     RESULTS:  Path analyses (n =258) revealed a moderate total effect for treatment predicting improvement in SDS score (β=-0.40, p=0.001). Treatment predicted improvement in MADRS (β=-0.33, p=0.009), which subsequently predicted improvement in SDS (β=0.70, p<0.001; indirect effect =-0.23). The direct effect was small yet significant (β=-0.17, p=0.04), indicating partial mediation. Indirect and direct effects accounted for 57% and 43% of the total effect, respectively. The full mediation model with indirect and direct effects explained 61.7% of the variation in the change in SDS scores. CONCLUSIONS: These analyses show that improvement in patient functioning among patients on lurasidone was largely mediated through reduction in depression symptoms. Lurasidone also had a small but statistically significant direct effect in improving patient functioning that was independent of improvements in depression within a 6-week study duration.