This study examines the mediating role of psychological resources on life satisfaction, an indicator of subjective wellbeing. The evidence identifies several life events and changing circumstances that can be potentially detrimental to the wellbeing of older adults. Based on the literature, a theoretical model was developed with the hypothesis that adaptation to potentially adverse events draws on psychological resources central to the self. The study participants were a random sample of 423 community-dwelling people aged 70 years and over. All respondents were interviewed in their own homes using a structured schedule. Quantitative data were obtained on age, gender, social support, marital status, physical functioning, bodily pain, loneliness, isolation and housing difficulties. Subjective well-being was assessed by the life satisfaction index, and the psychological mediator was conceptualised as a measure of environmental mastery. The first round of analyses found that variations in well-being were associated with housing difficulties, isolation, loneliness, physical functioning, pain, support networks and marital status. The full model established perfect mediation by environmental mastery occurred for the variables housing problems and physical functioning, and partial mediation occurred for the variable loneliness – supporting the original hypothesis. The results add to the evidence from an increasing number of studies that demonstrates how psychological resources underlie the processes of adaptation to the changing situations that accompany increasing age and prevent negative outcomes.