Previous studies have found that trust has a positive effect on subjective wellbeing. However, when trust is accumulated within a community, it can create expectations of trustworthiness and consequently be transformed into shared social norms. We hypothesized that trust toward community members (i.e., community trust) would have a positive effect on well-being at the individual level. Further, we anticipated that it would have a negative contextual effect on subjective well-being at the community level, because it constrains individual freedom by constructing shared norms within a community. We mailed our survey to each household across 105 randomly-sampled communities in the Yasu River watershed in Shiga prefecture, Japan. We conducted multilevel analyses using the survey data (Nindivdual = 3,116, Ncommunity = 99). As predicted, the results showed that community trust had a positive effect on subjective well-being at the individual level and a negative contextual effect at the community level. This suggests that living in a community where residents trust each other may dampen one's subjective well-being. Implications for studies on happiness and social dynamics are discussed.