Background: Mental wellbeing is formed by our daily environments, which are, in turn, influenced by public policies, such as the welfare state. This paper looks at how different aspects of life conditions may mediate the welfare state effect on mental wellbeing in oldest old age. Methods: Data were extracted from Round 6 of the European Social Survey (2012). The dataset comprised of 2058 people aged 80 years and older from 24 countries. Mediation analyses determined possible links between the welfare state, including eleven intervening variables representing life conditions and five mental wellbeing dimensions. Results: Our study confirms that the higher the level of welfare state, the better mental wellbeing, irrespective of dimension. Although several life conditions were found to mediate the welfare state effect on mental wellbeing, subjective general health, coping with income and place in society were the most important intervening variables. Conclusions: All three variables centre around supporting autonomy in the oldest old age. By teasing out how the welfare state influences mental wellbeing in the oldest old, we can better understand the many drivers of wellbeing and enable evidence informed age-friendly policy making.