ABSTRACT Introduction Researchers seldom consider the interplay between self‐enhancement (SE) and well‐being at both inter‐ and intraindividual levels. Previous studies have primarily focused on agentic SE and hedonic well‐being, often neglecting communal SE and eudaimonic well‐being. This study aims to address these gaps by examining the reciprocal relationship between both agentic and communal SE and both hedonic and eudaimonic well‐being. Self‐esteem is identified as a potential mediator in these relationships at both inter‐ and intraindividual levels. Method Using experience sampling, 172 participants ( M age = 24.25, 75% female) responded to smartphone prompts four times daily for 10 days, yielding 5925 observations. Data were analyzed with Dynamic Structural Equation Modeling. Results At the intraindividual level, stronger SE predicted increased hedonic and eudaimonic well‐being within a short period (about 4 h). This enhanced well‐being, in turn, was related to stronger SE, creating a positive feedback loop. At the interindividual level, higher agentic and communal SE correlated with greater well‐being. Self‐esteem mediated the reciprocal associations between SE and well‐being at both levels. Conclusion These findings offer new insights into the dynamics of SE and well‐being, supporting the positive link between SE and well‐being in everyday life, emphasizing the mediating role of self‐esteem across different analysis levels.