The United States, where sharp polarisation has been exposed in the 2016 presidential election campaign, outranked several Western European countries to be 13th most happy nation, up two spots from last year.
Germany was 16th, Britain 23rd and France 32nd. A string of Middle Eastern kingdoms - Saudi Arabia, Qatar, Kuwait and Bahrain - outranked Italy, which came in at number 50, and Japan, which took the 53rd spot.
China, the world's most populous country, was ranked 83rd and India, the world's largest democracy, came in at 118.
The authors said six factors - GDP per capita, social support, healthy life expectancy, social freedom, generosity and absence of corruption - explain almost three-quarters of the variation across different countries.
The report compared levels of happiness in 2005-2007, before the onset of the global recession, with 2013-2015, the most recent three-year period for which data from a Gallup World Poll is available.
Of the 126 countries for which comparable data was available, 55 had significant increases in happiness and 45 had significant decreases, the report found.
The top 10 countries ranked on the 2016 World Happiness Report:
1. Denmark
2. Switzerland
3. Iceland
4. Norway
5. Finland
6. Canada
7. Netheralnds
8. New Zealand
9. Australia
10. Sweden
Top 10 least happy countries
1 Burundi
2 Syria
3 Togo
4 Afghanistan
5 Benin
6 Rwanda
7 Guinea
8 Liberia
9 Tanzania
10 Madagascar
Washington Post and news.com.au
