Introduction: Economic development and improvement in life quality is the main objective of all societies in all levels. To this end, it is necessary to have a better understanding of factors affecting individual life quality. Quality of Life Index (QLI) is a suitable tool that reflects socio-economic condition of a society. Thus, QLI can be employed as a major tool in local and national development plans. Human capital, however, has a vital role in life quality through which development is affected.

Method: In this paper, the relationship between human capital (represented by the graduated people in bachelors, master and PhD) and QLI in all Iranian provinces is studied. To this end, using time series data of all provinces during the period of 2003-2009, and employing fixed effect in panel data model, the effect of human capital on QLI of all provinces is examined.

Findings: The results show that human capital, adult literacy rate and urban population rate have positive and significant effect on QLI of Iranian provinces. However, population has a negative and significant effect on QLI of provinces.

Conclusion: The results show that human capital has a significant effect on economic growth and, therefore, on life quality of people. However, the number of postgraduates (master and PhD) has had more effects on life quality compared with graduates (bachelors). Thus, government is suggested to increase investments on higher education if it is to improve life quality of individuals in Iranian provinces.