Background/Objective: Aging is associated with both cognitive and physical decline. Some factors, such as lifestyle and environment, can significantly contribute to accelerating or slowing down the decline processes. Our study aimed to evaluate the impact of lifestyle (active vs. non-active) and environmental context (institutionalized vs. non-institutionalized) on the cognitive functioning, psychological well-being, sleep quality, and daily living skills of elderly people. Methods: Our sample consisted of 182 subjects divided into active and non-active groups (subjects who engage or not in physical and social activities, respectively; mean age in years: 67.19 vs. 68.75) and 245 subjects divided into institutionalized and non-institutionalized groups (i.e., living in a nursing home or not, respectively; mean age in years: 79.49 vs. 71.72). Participants were enrolled voluntarily and randomly in the city of L’Aquila. A battery of psychological instruments was administered to evaluate general cognitive decline, depressive symptoms, self-assessed sleep quality, and daily living skills. Results: Regarding lifestyle, the active group exhibited significantly lower levels of depression, better sleep quality, and daily living skills with respect to the non-active group. Regarding environmental context, institutionalized subjects showed higher levels of depression and reduced cognitive functioning, which were linked to reduced sleep quality and worsened daily living skills. When comparing the non-active with the institutionalized group, the latter showed higher levels of depression and reduced cognitive functioning, more sleep complaints, and reduced daily living skills. Conclusions: Our study highlights that an active lifestyle and a non-institutionalized environment, both allowing greater mobility and autonomy, are two factors that positively contribute to the mental and physical well-being of elderly individuals. Furthermore, the healthcare institution context appears to have a greater negative impact on the psycho-physical well-being of the subjects involved compared to a non-active lifestyle.