Enhancing farmers’ well-being is the ultimate goal of social development. Using data from the 2020 China Rural Revitalization Survey (CRRS), this article explores the impact of village democracy on rural residents’ happiness, the mechanism and group differences of this impact. The research indicates that village democracy has a happiness effect and can significantly enhance rural residents’ well-being. Pathway mechanism analysis reveals that village democracy can improve rural residents’ happiness by enhancing their political trust, suppressing corruption at the grassroots level, and improving their subjective perception of the living environment. Furthermore, heterogeneity analysis shows that village democracy significantly affects the happiness of rural residents with less than a high school education, those aged 60 and above, and those who have completed the confirmation of rural homestead property rights. Therefore, to enhance rural residents’ well-being, we can focus on valuing the process of village democracy, promoting farmers’ democratic participation, maintaining relations between the rural officials and residents, enhancing political trust to foster political trust, improving the rural cultural environment, advancing the construction of harmonious and beautiful villages, refining supervisory mechanisms to strengthen anti-corruption measures, and addressing democratic matters relevant to the elderly and ensuring property stability for rural residents.