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Research showed that the college environment threatens the mental health development of students. The community college (CC) system is unique and the development of the psychological well-being (PWB) of students studying at CCs has not been extensively studied. It is also worth answering the question that how PWB relates to CC students' academic performance. In this study, the development of the PWB of CC students in Hong Kong and its relationship with the first-year academic performance have been explored. Results indicated that CC students' PWB decreased significantly after the first year of studies. Among the six constructs in PWB, only the change of Personal Growth, Self-Acceptance, and Purpose in Life significantly predicted students' first-year Cumulative Grade Point Average (CGPA), in which Purpose in Life yielded the greatest relative importance. The Purpose in Life level at the time also mediated the relationship between students' precollege and first-year college academic performance, however, such mediation effect could only be observed in non-first-generation students. The findings of this study suggested that the mental health conditions of CC students should have gained more attention. CCs should also have put more efforts and resources to help freshmen students foster their purpose in life so that they could have better chances to achieve academic success.