The World Happiness Report saw Denmark in second place, then Switzerland, Iceland and the Netherlands.
New Zealand was again the only non-European nation in the top 10. The UK fell from 13th to 17th place.
Data from analytics researcher Gallup asked people in 149 countries to rate their own happiness.
Measures including social support, personal freedom, gross domestic product (GDP) and levels of corruption were also factored in.
The country deemed the most unhappy in the world was Afghanistan, followed by Lesotho, Botswana, Rwanda and Zimbabwe.
There was a “significantly higher frequency of negative emotions” in just over a third of the countries, the report authors said, likely pointing to the effects of the pandemic.
However, things got better for 22 countries. Several Asian countries fared better than they had in last year’s rankings, while China moved to 84th place from 94th.
“Surprisingly there was not, on average, a decline in well-being when measured by people’s own evaluation of their lives,” John Helliwell, one of the report’s authors, said in a statement.
“One possible explanation is that people see Covid-19 as a common, outside threat affecting everybody and that this has generated a greater sense of solidarity and fellow-feeling.”
Finland “ranked very high on the measures of mutual trust that have helped to protect lives and livelihoods during the pandemic”, the authors said.
The Nordic nation of 5.5 million people has managed far better than the majority of Europe during the pandemic, with just over 70,000 cases and 805 deaths, according to Johns Hopkins University.
According to the report, the ten happiest countries are:
- New Zealand