Depression is a common comorbidity in type 2 diabetes (T2D) with higher prevalence than the general population. Sodium-glucose cotransporter-2 inhibitors (SGLT2i) have shown potential neuroprotective effects, clinical evidence on their effectiveness in preventing new-onset or relapses of depression remains limited. To compare the risk of new-onset depression and depression relapses among patients with T2D initiating SGLT2i, sulfonylureas (SU), or dipeptidyl peptidase-4 inhibitors (DPP-4i). Using a target trial emulation framework, we conducted an active-comparator new-user cohort study among patients with T2D initiating SGLT2i, SU, DPP-4i using nationwide healthcare data from Korea (2012-2023). We constructed two distinct cohorts: (1) an incidence cohort, excluding patients with a history of depression diagnosis, and (2) a relapse cohort, including patients with a pre-existing diagnosis of depression who were receiving antidepressant treatment at baseline. Patients were followed from the index date (defined as the first prescription of study drugs) until the earliest of outcome occurrence, drug discontinuation or switching, death, or study end (December 31, 2023). Outcomes of interest were new-onset depression and depression relapse, defined as a diagnosis of depression with simultaneous antidepressant prescription and an emergency department visit or hospital admission for depression, respectively. Propensity score (PS) matching weights were applied to adjust for confounding. Hazard ratios (HRs) and 95% confidence intervals (CIs) were estimated using Cox models for new-onset depression and first depression relapses, and rate ratios (RRs) and 95% CIs for depression relapses using Poisson models. Among 2,493,879 patients in the incidence cohort, 350,562 (14.1%), 427,830 (17.2%), and 1,715,487 (68.8%) initiated SGLT2i, SU, and DPP-4i, respectively. Over a mean follow-up of 1.5 years, SGLT2i use was associated with a lower risk of new-onset depression compared with SU (HR 0.86; 95% CI 0.81-0.92) and DPP-4i (0.86; 0.82-0.90). Among 220,212 patients in the relapse cohort, 29,910 (13.6%), 39,046 (17.7%), and 151,256 (68.7%) initiated SGLT2i, SU, and DPP-4i, respectively. Over a mean follow-up of 1.3 years, SGLT2i use was associated with a lower risk of depression relapse compared with SU (HR 0.62; 95% CI 0.53-0.73) and DPP-4i (0.75; 0.66-0.87). Consistent findings were observed for relapse events, with lower risks for SGLT2i compared with SU (RR 0.35; 95% CI 0.31-0.38) and DPP-4i (0.68; 0.62-0.76). In this nationwide cohort study, SGLT2i was associated with reduced risks of both new-onset depression and depression relapses compared with SU and DPP-4i in patients with T2D.