Background Happiness and higher intelligent quotient (IQ) are independently related to positive health outcomes. However, there are inconsistent reports about the relationship between IQ and happiness. The aim was to examine the association between IQ and happiness and whether it is mediated by social and clinical factors. Method The authors analysed data from the 2007 Adult Psychiatric Morbidity Survey in England. The participants were adults aged 16 years or over, living in private households in 2007. Data from 6870 participants were included in the study. Happiness was measured using a validated question on a three-point scale. Verbal IQ was estimated using the National Adult Reading Test and both categorical and continuous IQ was analysed. Results Happiness is significantly associated with IQ. Those in the lowest IQ range (70–99) reported the lowest levels of happiness compared with the highest IQ group (120–129). Mediation analysis using the continuous IQ variable found dependency in activities of daily living, income, health and neurotic symptoms were strong mediators of the relationship, as they reduced the association between happiness and IQ by 50%. Conclusions Those with lower IQ are less happy than those with higher IQ. Interventions that target modifiable variables such as income (e.g. through enhancing education and employment opportunities) and neurotic symptoms (e.g. through better detection of mental health problems) may improve levels of happiness in the lower IQ groups.