Teenagers and young adults (Gen Z) experience high rates of depression and anxiety, and one of the contributing factors is related to academic stress. Gen Z has unique characteristics, and technology has a powerful influence on the learning of Gen Z. Notwithstanding, evidence-based learning remains limited pertaining to the use of technology to alleviate the academic stress for Gen Z learning. Hence, to address this issue, this study integrates a well-being model, the Positive, Engagement Relationships, Meaning and Achievement (PERMA) Model into a technology-based teaching and learning approach, by introducing the Happy Capsule as a kit to promote learning engagement. Happy Capsule is a combination of five digital tools which are Padlet, Kahoot!, Wiki, e-portfolio, and an online learning style test. Employing the Participatory Action Research, this paper explores the experiences of 50 first-year university students’ in learning with Happy Capsule for over 14 weeks. Thematic analysis was used and four main themes emerged, namely self-management, engagement in learning, emotional aspects, and soft skills. The findings emphasize that digital learning has become a necessity to fulfil students’ learning needs, especially in the higher education setting. The study found that the implementation of positive emotion, engagement, relationship, meaning, and achievement elements in teaching and learning helps educators in designing more effective learning and assessment strategies to meet the current demands as well as to cater to students’ needs, styles, and preferences. In addition, it also increases motivation, enthusiasm, and builds good communication skills among students. Future research may focus on conducting more Action Research to improve practice by integrating various digital tools in teaching and learning in diverse contexts.