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Treating insomnia with Cognitive-Behavioral Therapy for Insomnia (CBT-I) improves depression symptoms, but the underlying mechanisms remain unknown. This single-arm mechanistic trial (ClinicalTrials.gov, NCT04424407) examined fronto-limbic and sleep mechanisms of CBT-I's antidepressant response in 48 participants (64% female; age 25-60) with insomnia and depression symptoms. Participants completed functional magnetic resonance imaging (fMRI), polysomnography (PSG), and symptom assessments before and after 6 CBT-I sessions. CBT-I resulted in reduced amygdala reactivity to fearful faces (d = 0.55, p = 0.008). Depression and sleep (objective and self-reported insomnia symptoms also improved. However, fMRI-assessed fronto-limbic changes were not associated with a reduction of depressive symptom severity. Instead, reduced depressive symptoms correlated with reduced self-reported insomnia symptoms (p = 0.001, η²p = 0.19) and increased objective sleep efficiency (p = 0.04, η²p = 0.10). Notably, pre-treatment PSG-assessed sleep efficiency, but not fronto-limbic function nor insomnia symptoms, predicted reduced depressive symptoms (p = 0.007, η²p = 0.16), suggesting that lower objective sleep efficiency prior to treatment may be associated with greater antidepressant benefit from CBT-I.