Repetitive transcranial magnetic stimulation (rTMS) is a commonly- used treatment for major depressive disorder (MDD). However, our understanding of the mechanism by which TMS exerts its antidepressant effect is minimal. Furthermore, we lack brain signals that can be used to predict and track clinical outcome. Such signals would allow for treatment stratification and optimization. Here, we performed a randomized, sham-controlled clinical trial and measured electrophysiological, neuroimaging, and clinical changes before and after rTMS. Patients (N = 36) were randomized to receive either active or sham rTMS to the left dorsolateral prefrontal cortex (dlPFC) for 20 consecutive weekdays. To capture the rTMS-driven changes in connectivity and causal excitability, resting fMRI and TMS/EEG were performed before and after the treatment. Baseline causal connectivity differences between depressed patients and healthy controls were also evaluated with concurrent TMS/fMRI. We found that active, but not sham rTMS elicited (1) an increase in dlPFC global connectivity, (2) induction of negative dlPFC-amygdala connectivity, and (3) local and distributed changes in TMS/EEG potentials. Global connectivity changes predicted clinical outcome, while both global connectivity and TMS/EEG changes tracked clinical outcome. In patients but not healthy participants, we observed a perturbed inhibitory effect of the dlPFC on the amygdala. Taken together, rTMS induced lasting connectivity and excitability changes from the site of stimulation, such that after active treatment, the dlPFC appeared better able to engage in top-down control of the amygdala. These measures of network functioning both predicted and tracked clinical outcome, potentially opening the door to treatment optimization.