Physical activity has been considered as an effective strategy for both physiological and psychological benefits. Though its effects are well documented among adolescents and adults, but it has not been studied extensively in middle aged people. Therefore, the objective of the present study was to see the effect of physical activity on perceived stress, sleep quality and happiness among middle aged people. Total 455 participants (males=197, females=258) in the age range of 40-60 years were recruited for the present study. To assess the domains of physical activity, perceived stress, sleep quality and subjective happiness, Godin-Shephard Leisure Time Exercise Questionnaire (Godin, 1985), Perceived Stress Scale (Cohen et. al., 1983), Pittsburgh Sleep Quality Index (Buysse, et al., 1989) and Subjective Happiness Scale (Lyubomirsky & Lepper, 1999) were used respectively. Obtained scores were subjected to two-way analysis of variance. Findings of the study revealed significant effect of physical activity on perceived stress (F= 3.34; p< 0.05) and sleep quality (F = 387.036; p< 0.01). But, physical activity did not produce significant effect on subjective happiness among male and female participants. The study indicates that physical activity plays a vital role in enhancing sleep quality and reducing perceived stress among middle-aged people. The significant implications have been discussed.