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The study of the physical activity engagement (PA) has given rise to a relevant research agenda in a wide range of fields, such as its close relationship with subjective well-being, self-perceived health and social capital. Previous evidence has identified interrelationships among these variables, but without considering different levels of physical activity. We have thus considered three levels of activity: light (walking), moderate and vigorous. Structural Equation Modelling (SEM) is undertaken on data from Spain's National Health Survey in 2011–2012 to analyse these interrelationships. The SEM shows a simultaneous and bidirectional relationship between different levels of PA (moderate and vigorous activities) and happiness, with a more robust association stemming from happiness to PA than vice versa. This relationship is mediated through health. From a policy perspective, this implies a virtuous circle: involvement in different levels of PA increases happiness and self-perceived health, while happiness involves higher PA and subsequent positive increases in health and happiness. Nevertheless, this virtuous circle does not always run successfully when social capital is considered to mediate the relationship between PA and happiness, which might explain why it has proven to be very difficult for health policymakers to fight against inactivity and a sedentary lifestyle within a great part of the population. Highlights We investigate bidirectional interrelationships between different levels of physical activity (PA) and happiness. We consider the mediation role played by self-perceived health (SPH) and social capital. Our results highlight a network of association between different levels of PA, SPH, social capital and happiness. SPH positively mediates this relationship for any type of PA level, whereas social capital only mediates positively when vigorous PA is developed. From a health policy perspective, the simultaneity between PA levels and happiness implies a virtuous circle. [ABSTRACT FROM AUTHOR]