The work has been the subject of more modern interpretation than almost any other print, including a two-volume book by Peter-Klaus Schuster, and a very influential discussion in his Dürer monograph by Erwin Panofsky. Reproduction usually makes the image seem darker than it is in an original impression (copy) of the engraving, and in particular affects the facial expression of the female figure, which is rather more cheerful than in most reproductions. The title comes from the (archaically spelled) title, Melencolia I, appearing within the engraving itself. It is the only one of Dürer's engravings to have a title in the plate. The date of 1514 appears in the bottom row of the magic square, as well as above Dürer's monogram at bottom right. Suggestions that a series of engravings on the subject was planned are not generally accepted. Instead it seems more likely that the "I" refers to the first of the three types of melancholia defined by the German humanist writer Cornelius Agrippa. In this type, Melencholia Imaginativa, which he held artists to be subject to, 'imagination' predominates over 'mind' or 'reason'.

One interpretation suggests the image references the depressive or melancholy state and accordingly explains various elements of the picture. Among the most conspicuous are:

Erwin Panofsky proposed the most authoritative interpretation of Melencolia I as Dürer's "spiritual self portrait". Panofsky also considers many of the objects of the picture to be Saturnian, the planet associated with melancholy; the magic square is a reference to Jupiter and alleviates the melancholic influence of Saturn.

Patrick Doorly has shown that the engraving is much indebted to Plato's Hippias Major and even more to Luca Pacioli's book De Divina Proportia.

David Finkelstein has suggested recently some new readings for various elements of the composition.

John Read has commented on the alchemic symbolism of the engraving.