Memory lapses are a type of daily challenge that are common to most people and are associated with negative mood outcomes. How daily challenges are associated and linked to broad domains, like life satisfaction and well-being, has been underexamined. Life satisfaction is often assessed from a macro-level that emphasizes average differences over longer timeframes, yet daily experiences (i.e., micro-level) may accumulate to shape these characteristics. In the current study, we examined if daily memory lapses (e.g., difficulties with word-finding or forgetting a meeting) were associated with life satisfaction, and whether this relationship was mediated by the associated changes in positive and negative affect due to daily memory lapses. In a coordinated analysis of two datasets (N = 561, ages 25-93 years), we used multilevel structural equation modeling to assess how daily memory lapses may influence the broader outcome of global life satisfaction. The pattern of results was similar across datasets: memory lapses were associated with reduced positive affect and increased negative affect. Further, the daily affect associated with daily memory lapses significantly mediated the relationship between lapses and life satisfaction, while the direct relationship between memory lapses and life satisfaction was non-significant. This study provides support for the role of daily challenges, specifically memory lapses, influencing broader constructs such as psychological well-being by identifying the key factor of affective responses. Future work should identify other salient daily challenges, as well as explore if reducing the affective response to challenges through targeted interventions would mitigate impacts on distal functioning.