We tested the hypothesis that mindwandering and external distraction are both manifestations of a common state of reduced attention focus, and examined how both relate to reported level of happiness. We conducted real-time sampling of people’s experience of mindwandering, irrelevant distraction (e.g. by music, phone, etc.), and happiness levels, in two studies with 524 people undertaking common daily-life activities. All irrelevant external distractions were positively correlated with mindwandering. Indeed mindwandering duration could be predicted from the reported duration of external distraction, when controlling for a range of background variables. An exploratory factor analysis of mindwandering and distraction reports suggested a single underlying construct. In addition, duration of irrelevant distraction by both mobile phones and mindwandering was significantly associated with reduced reported levels of happiness. The results are consistent with the hypothesis that that a state of reduced attention focus underlies both mindwandering and distractibility and clarify the link with happiness.