Individuals with depression exhibit dysfunctional emotion regulation, general episodic memory deficits, and a negativity bias, where negative experiences are better remembered. Recent work suggests that the negativity bias in depression may be driven by enhanced mnemonic discrimination, a memory measure that relies on hippocampal pattern separation – a computation that processes experiences with overlapping features as unique. Previously, we found that individuals with depressive symptoms show enhanced negative and impaired neutral mnemonic discrimination. The current study aimed to investigate emotion regulation as an approach toward modifying memory encoding of negative and neutral events in individuals with depressive symptoms. Here we show that applying psychological distancing (a cognitive reappraisal strategy characterized by taking a third-person perspective toward negative events) during encoding was associated with reduced negative and enhanced neutral mnemonic discrimination during retrieval in individuals with depressive symptoms. These results suggest that applying emotion regulation techniques during encoding may provide an effective approach toward altering dysfunctional memory in those with depressive symptoms. Given that pharmacological treatments often fail to treat depression, emotion regulation provides a powerful and practical approach toward modifying cognitive and emotional processes. Future neuroimaging studies will be important to determine how emotion regulation impacts the neural mechanisms underlying these findings.