Studies using transcranial magnetic stimulation with simultaneous electroencephalography (TMS-EEG) revealed an imbalance between cortical excitation and inhibition (E/I) in the dorsolateral prefrontal cortex (DLPFC) in depression. As adolescence is a developmental period with an increase in depression prevalence and profound neural changes, it is crucial to study the relationship between depression and cortical excitability in adolescence. We aimed to investigate the cortical excitability of the DLPFC in adolescents with depression and a dependency of the TMS-evoked potential N100 on the depression severity. 36 clinical patients (12–18 years of age; 21 females) with a major depressive episode were assessed twice in a longitudinal design: shortly after admission (T0) and after six weeks of intervention (T1). GABA-B-mediated cortical inhibition in the left and right DLPFC, as assessed by the N100, was recorded with EEG. Significantly higher depression scores were reported at T0 compared to T1 (p < 0.001). N100 amplitudes were significantly increased (i.e., more negative) at T0 compared to T1 (p = 0.03). No significant hemispheric difference was found in the N100 component. The correlation between the difference in depression severity and the difference in N100 amplitudes (T0–T1) obtained during stimulation of the left DLPFC did not remain significant after correction for testing in both hemispheres. Higher N100 amplitudes during a state of greater depression severity are suggestive of an E/I imbalance in the DLPFC in adolescents with an acute depressive episode. The N100 reduction potentially reflects a normalization of DLPFC over inhibition in association with decreased depressive symptomatology, indicating severity dependency.