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Background Depression is frequently comorbid with posttraumatic stress disorder (PTSD) and substantially influences its severity, course and outcomes. Published studies linking war-related paediatric PTSD and Major depressive disorder (MDD) were mainly based on cross-sectional studies. Objective To prospectively examine the role of PTSD and other risk/protective factors in the development of depression among adolescents with war-related trauma. Methods A longitudinal study of 160 adolescents aged 15–17 years with war-related trauma and displacement due to war in Eastern Ukraine was performed. Of the 160 adolescents, N = 86 met Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition (DSM-4) criteria for PTSD. All adolescents underwent comprehensive psychiatric assessments that included Kiddie-Schedule for Affective Disorders and Schizophrenia-Present and Lifetime version (K-SADS-PL) administered to both parents and children. Traumatic exposure was assessed using the modified Traumatic Events Screening Inventory for children (TESI-C). PTSD and MDD were assessed with the Clinician-Administered PTSD Scale for Children and Adolescents (CAPS-CA) and Children's Depression Rating Scale-Revised (CDRS-R), and diagnosed using DSM-4 criteria. Follow-up and repeated measurements occurred at 6 and 12 months. During the study, adolescents requiring clinical care were referred for best available care in the community. Results Among 92.6% of study completers, 26/79 youth with PTSD developed MDD (32.9%), compared to 6/70 without PTSD (8.5%): relative risk (RR) = 3.83 (95% CI 1.67–8.78), p = 0.0014; Number needed to harm (NNTH) = 4.108 (8.53–2.7). Using logistic regression, variables of school attendance, ‘secondary’ traumatic exposure, and treatment with Trauma-focused Cognitive Behavioral Therapy (TF-CBT) were significantly correlated with the incidence of new-onset depression among adolescents with PTSD. Conclusions War-related trauma with subsequent PTSD appears to be a significant risk factor for the later development of depression in adolescents. The role of PTSD as a moderator of depression merits further investigation in larger scale longitudinal studies in diverse populations.