To examine the effect of happiness and life satisfaction on health. Longitudinal data from waves 1 and 3, conducted in 2001 and 2004, respectively, of the Household Income and Labour Dynamics in Australia survey. Australia. A total of 9981 respondents aged 18 years and older. Outcomes were self-reported health; the absence of long-term, limiting health conditions; and physical health. Happiness was assessed with the following question: "During the past 4 weeks, have you been a happy person"? Life satisfaction was determined with the following question: "All things considered, how satisfied are you with your life"? We used multiple regression analysis to estimate odds ratios (ORs), beta coefficients (beta), and 95% confidence intervals (CIs) for the associations between baseline happiness or life satisfaction and health at wave 3. Baseline happiness and life satisfaction both were positively associated at wave 3 with excellent, very good, or good health (OR = 1.50, CI = 1.33-1.70, p < .0001; and OR = 1.62, CI = 1.27-2.08, p < .0001, respectively); with the absence of long-term, limiting health conditions (OR = 1.53, CI = 1.35-1.75, p < .0001; and OR = 1.51, CI = 1.25-1.82, p < .0001, respectively); and with higher physical health levels (beta = .99, CI = .60-1.39, p < .0001; and beta = .99, CI = .20-1.78, p < .0145, respectively). This study showed that happier people and those who were more satisfied with their lives at baseline reported better health (self-rated health; absence of limiting, long-term conditions; and physical health) at the 2-year follow-up when adjusted for baseline health and other relevant covariates.