This study aims to investigate the associations of caring for grandchildren and/or great-grandparents with depressive symptoms, as well as life satisfaction in Chinese grandparents, and analyze the moderating roles of urban-rural residence and social participation. A nationally representative sample of 2973 grandparents in families with great-grandparents and grandchildren were selected from the 2018 China Health and Retirement Longitudinal Study (CHARLS). The Center for Epidemiologic Studies Depression (CESD-10) and the single-item were used to measure depressive symptoms and life satisfaction. Social participation included participation in social and intellectual activities. The binary logistic regression model was employed to explore the relationship between caring and depressive symptoms, as well as life satisfaction in the whole participants, different urban-rural residence, and social participation groups, respectively. Caring was associated with depressive symptoms and life satisfaction (p < 0.05). A significant interaction existed between caring and urban-rural residence for depressive symptoms (interaction p = 0.029) and life satisfaction (interaction p = 0.027). Significant interactions were also found among caring, urban-rural residence, and social activities with depressive symptoms (interaction p = 0.025). In urban, caring for both was negatively related to depressive symptoms for the non-social activists, while in rural, caring for great-grandparents was positively associated with depressive symptoms for social activists (p < 0.05). Any new policy design related to preventing and reducing the possibility of mental disorders in Chinese grandparents should be tailored to heterogeneous subgroups who live in different rural-urban and social activities participation.