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Background: Understanding the mechanisms in the brain's incentive network that give rise to symptoms of major depressive disorder (MDD) during adolescence provides new perspectives to address MDD in early stages of development. This functional magnetic resonance imaging study determines whether instrumental vigor and brain responses to appetitive and aversive monetary incentives are altered in adolescent MDD and associated with symptom severity. Methods: Adolescents with moderate to severe MDD (n=30, age=16.1 [1.4]), and healthy controls (n=33, age=16.2 [1.9]) matched for age, sex, and IQ performed a monetary incentive delay task. During outcome presentation, prediction error signals were used to study the response and coupling of the incentive network during learning of cue-outcome associations. A computational reinforcement model was used to assess adaptation of response vigor. Brain responses and effective connectivity to model-derived prediction errors were assessed and related to depression severity and anhedonia levels. Results: Participants with MDD behaved according to a more simplistic learning model and exhibited slower learning. Effective connectivity analysis of fMRI data revealed that impaired loss error processing in the orbitofrontal cortex was associated with aberrant gain-control. Anhedonia scores correlated with loss-related error signals in the posterior insula and habenula. Conclusions: Adolescent MDD is selectively related to impaired processing of error signals during loss, but not reward, in the orbitofrontal cortex. Aberrant evaluation of loss outcomes might reflect an early mechanism of how negative bias and helplessness manifest in the brain. This approach sheds light on pathomechanisms in MDD and may improve early diagnosis and treatment selection.