This study aimed to identify factors associated with psychological well-being among young people 18 to 24 years of age in Pelotas, Rio Grande do Sul State, Brazil. In a population-based cross-sectional study, 1,621 subjects answered a structured questionnaire on socio-demographic data, religion, employment, and substance use, as well as the Mini International Neuropsychiatric Interview (MINI) to assess psychiatric disorders. The Faces Scale (Andrews) was used to evaluate psychological well-being. Poisson regression was used for multivariate analysis. Of the total sample, 85.3% displayed psychological well-being, which was positively associated with non-use of illicit drugs, current employment, religion, socioeconomic status (classes A and B), higher educational levels, and absence of psychiatric disorders. Programs to reduce poverty and encourage education and identification and prevention of drug use among youths are of paramount importance to improve their health and psychological well-being.