The "happy at home" index, now in its tenth year, asked more than 21,000 people across Britain how they feel about where they live, with measures including friendliness, and access to local amenities.
Hexham in Northumberland came top - the market town previously topped the index in 2019.
St Ives in Cornwall, which came top last year, was eighth in this year's rankings.
Happiness measures include friendliness and community spirit, whether people feel they can be themselves, nature and green spaces, opportunities locally to develop skills and amenities, including schools, restaurants, shops and sporting facilities.
The average price tag for a house in Hexham is £297,088 - just a quarter of one in the leafy London suburb of Richmond, which was ranked second and has an average asking price just shy of £1.2 million.
Hexham is also lower than the UK average of £342,401.
Mayor of Hexham Derek Kennedy said:
"Hexham is thrilled to be awarded the happiest place to live in Great Britain.
"We are a small town with great history, Hexham Abbey and other historical buildings, and our market place is 800 years old. There is a wonderful community spirit, people are very supportive of one another."
He added:
"The open countryside is wonderful with Hadrian's Wall on our doorstep."
The local council, he said, had recently introduced free live music events with "big ambitions" to progress sustainable development.
"We all know how great it is to live in Hexham but to win this accolade is fantastic."
Harrogate in North Yorkshire took the third spot.
Stirling was identified as the happiest place to live in Scotland, while Llandrindod Wells took the crown for Wales.
Around a third of this year's top 20 towns are market towns.
The study, by Rightmove, found that people living in coastal villages tend to be happiest.
It also found that 69% of people who had moved in the last year have relocated to a new area, with 64% now feeling happier where they live.
The real estate company predicts around 1.5 million house sales will have taken place this year.
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