Social identities are known to improve well‐being, but why is this? We argue that this is because they satisfy basic psychological needs, specifically, the need to belong, the need for self‐esteem, the need for control and the need for meaningful existence. A longitudinal study (N = 70) revealed that gain in identity strength was associated with increased need satisfaction over 7 months. A cross‐sectional study (N = 146) revealed that social identity gain and social identity loss predicted increased and reduced need satisfaction, respectively. Finally, an experiment (N = 300) showed that, relative to a control condition, social identity gain increased need satisfaction and social identity loss decreased it. Need satisfaction mediated the relationship between social identities and depression in all studies. Sensitivity analyses suggested that social identities satisfy psychological needs in a global sense, rather than being reducible to one particular need. These findings shed new light on the mechanisms through which social identities enhance well‐being.