Introduction Happiness and social inclusion are important indicators of social sustainability, as recommended in the Sustainable Development Goals; however, little is known about the social sustainable development of ethnic minorities. To fill this knowledge gap, special attention is paid to understanding the issues of social exclusion and happiness in relation to the indigenous peoples in Taiwan. Methods Data used were drawn from a nationwide representativeness survey of the Taiwanese Indigenous People in 2007; it included 2,200 respondents. This study employed binary logistic regression to examine the effects of different domains of social exclusion on the likelihood of perceiving happiness; other exogenous factors, were controlled. Results The results show that among the respondents, mountain indigenous peoples, females, the elderly and those who are healthier, wealthier, highly educated, possessing western beliefs, and are more likely to be happy, compared to their counterparts. As expected, the results reveal that the likelihood of being happy is higher for those who have received medical benefits, as well as those persons without housing problems or financial difficulties, compared to their excluded counterparts. However, no significant association is found between happiness and some social exclusion domains, such as child and youth benefits, and unemployment benefits. Conclusions The disengagement of the indigenous peoples in mainstream society, with respect to the accessibility of welfare provisions, is a crucial element in regard to social exclusion and happiness. Several policy implications for the social sustainability of indigenous peoples can be inferred from these findings. For example, providing a mobile clinical tour, on-site health counseling, or homecare service can contribute to the removal of institutional and geographic barriers to medical welfare provisions for the mountain indigenes. Moreover, the government may devote more welfare resources to assist indigenous families and tribal communities to develop their own social safety net, instead of the individual-oriented welfare provisions.