Life satisfaction continues to be an important construct in the psychosocial study of ageing. It is one of the commonly-accepted subjective conditions of quality of life and seems to be one of the facets of successful ageing, both of which are key concepts in ageing. Research reports that life satisfaction is strongly related to socio-demographic and psychosocial variables. These, however, are mutually dependent interactive variables, and much more attention should be paid to the study of the relative contribution of these two types of factors to life satisfaction. The purpose of the research reported in this article was to discover which socio-demographic conditions and psychosocial factors are the most important, and to decide to what extent they contribute to life satisfaction. A sample of 507 individuals aged 65 and over and representative of the Spanish population in terms of age and gender, were interviewed at home. The results indicate that two socio-demographic characteristics (income and education) influence life satisfaction both directly and also indirectly, through psychosocial factors such as activity (physical activity level, satisfaction with leisure activities, and social contacts), perceived health and physical illness. Among psychosocial factors, activity and health both contribute to explaining life satisfaction. The results are discussed from the point of view of the activity theory of ageing.