Vanuatu was placed at the top of the Happy Planet Index when analysts measured countries' consumption of resources, life expectancy and happiness.
The UK did less well, rated 108th between Libya and Laos in the report by think-tank the New Economics Foundation (NEF). The group said that the UK's heavy "ecological footprint" was to blame for its low ranking.
The top ten was dominated by Latin American countries with Colombia, often associated with drugs cartels, civil wars and kidnappings, placed second.
The United States came in at 150 out of 178, and Zimbabwe was bottom.
The NEF said that countries needed to look beyond measuring the well-being of their citizens simply by looking at gross domestic product (GDP).
Ruth Potts, from the NEF, described the index as showing "the best places where people are able to live long and happy lives without overstretching the world's resources".
She said that the UK's high use of natural resources meant it scored low in the index, along with countries such as France (129th) and Canada (111th).
"If everyone in the world lived as we do in the UK, we would need 3.1 planets like Earth to have enough resources," Ms Potts said.
The three major measures for the index were life satisfaction, including how happy people believe themselves to be, life expectancy and the ecological footprint - the use of land and natural resources to sustain the population.
Andrew Simms, NEF's policy director, said it was usual to compare countries in terms of crude riches or what they trade, but their index was much more fundamental than that.
"It addresses the relative success or failure of countries in giving their citizens a good life while respecting the environmental resource limits on which all our lives depend," he said.
Simon Bullock, from Friends of the Earth, said: "The UK economy hoovers up vast quantities of the world's scarce resources, yet British people are no happier than Colombians or Guyanese, who use far fewer."
Andrina McCormack, a psychologist from Dundee, said
happiness and life satisfaction were influenced by the surroundings and the environment in which we live.