This study aims to refine the gross national happiness (GNH) development concept of Bhutan at the farm level and to show the major temporal and spatial trends in the development of rural areas with differing agroecological conditions and adoption of cattle crossbreeding. The study areas (four localities) are described as extensive, semi-intensive, intensive, and intensive peri-urban. Technical, social, economic, and environmental data from 183 households in the study areas were collected in 2000, 2004, and 2015. Participatory methods were used to select from the collected data the most relevant issues and their corresponding indicators at the farm level. The issues identified during the field workshops conducted in the study areas could be grouped as social, economic, and environmental. Next, the indicators were aggregated into economic, social, and environmental indices. In 2000 and 2004, the intensive peri-urban area showed the highest performance in the economic and social indicators. Livestock farming, despite its potential for dairying, was prohibited in one of the localities in 2010 when the territorial coverage of the capital Thimpu expanded. On the other hand, the dynamics of the indicators in the other three localities indicated that the social and economic indices were highest in the intensive area, followed by the semi-intensive area, and lastly, by the extensive area. This could be because different crossbreeding techniques were implemented in these areas. In the period 2004–2015, the reference values of the social indices declined, which could be attributed to increased rural-urban migration and intensified farm labor shortages in the study areas. The environmental indices did not change much during the monitoring periods. In summary, this study presents a methodological approach for examining the GNH in Bhutan based on participatory identification of social, economic, and environmental issues and indicators along with the reference values for the selected indicators. Likewise, this study showed that an integral assessment can complement the implementation of the GNH philosophy in the rural areas of Bhutan.