Background: Patients with major depressive disorder (MDD) frequently present with sleep disturbances and cognitive impairment. The purpose of this study was to investigate whether cognitive impairment is more severe in MDD patients with insomnia, and the underlying neural mechanisms. Methods: A total of 41 MDD patients with insomnia and 43 MDD patients without insomnia were recruited. We used functional near-infrared spectroscopy (fNIRS) to assess changes in oxyhemoglobin (Oxy-Hb) concentrations in the brain of patients while performing a verbal fluency task (VFT). Sleep quality was assessed by the Pittsburgh Sleep Quality Index (PSQI), cognitive function by the Repeatable Battery for the Assessment of Neuropsychological Status (RBANS), and severity of depression by the Hamilton Depression Scale (HAMD). Results: Compared to MDD patients without insomnia, those with insomnia had lower scores on the RBANS total and immediate memory, visuospatial/constructional, and delayed memory subscales, as well as lower oxy-Hb concentrations in the bilateral dorsolateral prefrontal cortex (DLPFC) and bilateral medial prefrontal cortex (mPFC).Further correlation analysis showed that there was a significant correlation between the RBANS total score in all brain regions except left mPFC in MDD patients with insomnia(all p < 0.05). Further multiple linear regression showed that Oxy-Hb concentrations of left DLPFC were independently associated with RBANS total score. Conclusion: Our study suggests that MDD patients with insomnia have more cognitive impairment, which is associated with impaired frontal brain activity. Our findings may provide new insights to understand the underlying neural mechanisms of both disorders MDD patients and provide potential clinical value for developing treatment strategies for insomnia in MDD patients.