Social contact is known to be vital for older adults' mental and physical health, but few studies of social interactions have taken place in long-term care settings. The current study investigated whether the psychological well-being of assisted living residents was influenced by factors associated with residents' social interactions involving humor. Specific aims of the present study were to develop and test a measure related to humor-related social exchanges, to examine how humor-related social exchanges affect residents' mental health, and to explore whether humor-related social exchanges mediated the effects of resident and facility characteristics on indices of mental health. One hundred and forty older adults residing in 14 assisted living facilities in the Portland, Oregon metropolitan area were interviewed about the frequency and types of social interactions they experienced with members of their facility-based social networks, as well as depression, mood, loneliness, self-esteem, and self-rated health. A 12-item, two-factor model of humor-related social exchanges was identified through confirmatory factor analysis, including both positive and negative humor-related social exchange factors. The newly developed scale displayed evidence of adequate reliability and validly in the current sample. Results indicated that both positive and negative humor-related exchanges were associated with various aspects of mental health, although negative humor-related exchanges appeared to be a stronger predictor of mental health than positive humor-related exchanges. Both positive and negative humor-related exchanges also served as mediators between resident and facility characteristics and indicators of mental health. Cultivating a better understanding of the relationships between humor-related social exchanges and mental health may be beneficial for researchers interested in the way humor impacts older adults' ability to cope with stress. This research may also be of value to long-term care providers who create interventions designed at improving residents' mental health and overall quality of life.