Canberra led the regional ranking while Australia topped the overall country rankings, followed by Norway.
It used nine measures of wellbeing, including income, education, jobs, safety, health and environment.
Five Australian cities including Sydney, Melbourne and Perth were also in the top 10.
The OECD rankings were met with pride by some Australian media outlets and surprise by others.
An opinion piece on popular website news.com.au, owned by News Corp, said: "Canberra is not, as you might believe, a desolate wasteland of bleak suburbia punctuated by shiny expensive monuments, fake lakes, porn megastores, snake-riddled grasslands and endless, befuddling roundabouts."
"Recent years have seen an increasing awareness that macro economic statistics, such as GDP do not provide policy-makers with a sufficiently detailed picture of the living conditions that ordinary people experience," the OECD said on its website.