In recent decades, the synergy between economic growth and environmental protection has become one of the most challenging issues in policymaking. The concept of green productivity has emerged as a new paradigm in which economic efficiency improvement is defined by simultaneously considering desirable and undesirable environmental outputs. The present study investigates the effect of green productivity on economic welfare in Iran over the period 1971–2023 (1350–1402). For this purpose, the advanced Global Malmquist–Luenberger (GML) green productivity index has been employed, which accounts for inputs (labor, capital, energy consumption), a desirable output (Gross Domestic Product), and an undesirable output (carbon dioxide emissions), based on the theoretical framework of Oh (2010) and the computational approach of Liu et al. (2021). Welfare is measured using the composite Index of Economic Well-Being (IEWB) proposed by Osberg and Sharpe (2009). To distinguish short-run and long-run effects, the Autoregressive Distributed Lag (ARDL) approach is used, and economic growth, per capita income, inflation rate, urbanization rate, and foreign direct investment are included as control variables. The findings indicate that the green productivity index has a positive and significant effect on economic welfare in both the short run and the long run. The considerable increase in coefficients in the long run compared to the short run reflects the accumulation of benefits from improved green productivity and the sustainability of its effects on welfare. Economic growth, per capita income, urbanization, and foreign direct investment also have positive impacts on welfare, with their coefficients increasing in the long run, indicating the depth and sustainability of their effects. In contrast, the inflation rate has a negative and detrimental effect on welfare in all estimations, with this effect intensifying in the long run. Based on the findings, it is recommended that policymakers prioritize the enhancement of green productivity as a core strategy in the country's development programs.