Abstract: Background and Objectives: Depression is a common mental problem in the older population and has a significant impact on recovery and general well-being. A comprehensive understanding of the prevalence of depressive symptoms and their effects on functional outcomes is essential for improving care strategies. The primary aim of this study was to determine the prevalence of depressive symptoms in older patients undergoing geriatric rehabilitation and to assess their specific impact on their functional abilities. Materials and Methods: A retrospective study was conducted at the Lucerne Cantonal Hospital inWolhusen, Switzerland, spanning from 2015 to 2020 and including 1159 individuals aged 65 years and older. The presence of depressive symptoms was assessed using the Geriatric Depression Scale (GDS) Short Form, while functional abilities were evaluated using the Functional Independence Measure (FIM) and the Tinetti test. Data analysis was performed using TIBCO Statistica 13.3, with statistical significance set at p < 0.05. Results: Of the participants, 22.9% (N = 266) exhibited depressive symptoms, with no notable differences between genders. Although all patients showed functional improvements, the duration of rehabilitation was prolonged by two days (p = 0.012, d = 0.34) in those with depressive symptoms. Alarmingly, 76% of participants were classified as at risk of falling based on the Tinetti score. However, no significant correlation was found between the GDS and Tinetti scores at admission (p = 0.835, r = 0.211) or discharge (p = 0.336, r = 0.184). The results from the non-parametric Wilcoxon matched-pairs test provide compelling evidence of significant changes in FIM scores when comparing admission scores to those at discharge across all FIM categories. Conclusions: Depressive symptoms are particularly common in geriatric rehabilitation patients, leading to prolonged recovery time and increased healthcare costs. While depressive symptoms showed no correlation with mobility impairments, improvements in functional status were directly associated with reduced GDS scores. Considering mental health during admission and planning is critical in optimizing rehabilitation outcomes.