Happiness is frequently posited as an important outcome of quality of life and characteristic of well-adjusted and functioning individuals. Happy individuals are less likely to report adverse mental health. Understanding the importance that individuals place on happiness is less clearly articulated and inconsistent. Valuing or placing higher importance of happiness appear to confer both benefits and risk for mental health outcomes. The primary aim of this study was to examine the relationship between the importance of happiness and mental health outcomes and whether the relationship between happiness and mental health is moderated by the importance individuals place on happiness. We utilised data from two studies, a university student sample (n = 413) and a community sample (n = 248) to examine the study aims. Mental health was operationalised in terms of psychological distress and symptoms of depression and anxiety. Happiness and the level of importance individuals ascribed to happiness were associated with adverse mental health outcomes. In multi-variate analyses, level of happiness was more strongly related to mental health. Interactions between happiness and the importance of happiness revealed that the effect of happiness was moderated by the importance that individuals placed on happiness. Overall happiness and to a lesser extent, the importance of happiness, are significantly associated with mental health outcomes. Happiness was most strongly related to mental health amongst those who rated the importance of happiness more highly.