Social isolation during the lockdown, and the greater use of online platforms to connect with other people, can alter the dynamic relationship between loneliness, social media use, and subjective well-being. The study examines the mediating role of loneliness in the bidirectional association between Instagram addiction and life satisfaction. Methods: A sample of 954 university students from Poland were enrolled in a cross-sectional online study during the second wave of the COVID-19 pandemic. Participants aged between 19 and 42 (M = 22.56, SD = 2.36), and most of them were women (86.48%). Standardized questionnaires were used to measure Instagram addiction (BIAS), loneliness (DJGLS), and life satisfaction (SWLS). Results: The prevalence of Instagram addiction, loneliness, and dissatisfaction with life was 17.19%, 75%, and 40.15%, respectively. The mediating effect of loneliness on the relationship between Instagram addiction and life satisfaction was found bidirectionally in women but not among men. Conclusions: Loneliness seems to play a crucial role in the mechanism of social media addiction, so increasing loneliness should be a priority among emerging adults. The target group for intervention and prevention programs at campuses should include lonely and dissatisfied with life university students of the female gender.