A relationship between individualism and happiness has been observed in many studies, with collectivist cultures having lower indices of happiness. It is often argued that this effect arises because people in individualist countries have greater independence and more freedom to pursue personal goals. It appears, however, that the association is much more complex than this as many collectivist countries suffer from more basic problems, such as social conflicts, discrimination, and prejudice. We hypothesized that global differences in happiness could be the result of ingroup bias and its consequences, rather than of collectivism itself. To test our hypotheses, we applied a country-level design, where a country is considered a unit of analysis. We found that individualism predicted various aspects of a country’s aggregated level of happiness, but was only a marginal predictor of happiness when ingroup favoritism and group-focused enmity were controlled for. We discuss the implications of these findings from evolutionary and social psychological perspectives.