Objective To evaluate the effectiveness of a population based, multifaceted shared care intervention for late life depression in residential care. Design Randomised controlled trial, with control and intervention groups studied one after the other and blind follow up after 9.5 months. Setting Population of residential facility in Sydney living in self care units and hostels. Participants 220 depressed residents aged greater than or equal to 65 without severe cognitive impairment. Intervention The shared care intervention included: (a) multidisciplinary consultation and collaboration, (b) training of general practitioners and carers in detection and management of depression, and (c) depression related health education and activity programmes for residents. The control group received routine care. Main outcome measure Geriatric depression scale. Results Intention to treat analysis was used. There was significantly more movement to "less depressed" levels of depression at follow up in the intervention than control group (Mantel-Haenszel stratification test, P = 0.0125). Multiple linear regression analysis found a significant intervention effect after controlling for possible confounders, with the intervention group showing an average improvement of 1.87 points on the geriatric depression scale compared with the control group (95% confidence interval 0.76 to 2.97, P = 0.0011). Conclusions The outcome of depression among elderly people in residential care can be improved by multidisciplinary collaboration, by enhancing the clinical skills of general practitioners and care staff, and by providing depression related health education and activity programmes for residents.