Literature uncovers that depression is common in elderly people. The problem is more serious in elderly with chronic physical illnesses. Although the relationship between physical problems and depression is well documented, the underlying mechanism is basically unknown. This article proposed after a comprehensive literature review that depression in elderly with chronic physical illnesses results from disability and a reduction in psychosocial resources. If depression is left untreated, suicide may be a consequence. In view of this, various forms of psychosocial interventions are developed based on mainstream western medicine. The authors argue that qigong, a form of Chinese therapeutics, has the effect of alleviating clinical depression and thus improves quality of life. A simple form of dynamic qigong, namely the Eight-Section Brocades, is suggested to serve the purpose. A theory which explains the psychosocial effect of qigong is hypothesized.