This field study tested the hypothesis that domestic horses living under putatively challenging-to-welfare conditions (for example involving social, spatial, feeding constraints) would present signs of poor welfare and co-occurring pessimistic judgement biases. Our subjects were 34 horses who had been housed for over 3 years in either restricted riding school situations (e.g. kept in single boxes, with limited roughage, ridden by inexperienced riders; N = 25) or under more naturalistic conditions (e.g. access to free-range, kept in stable social groups, leisure riding; N = 9). The horses’ welfare was assessed by recording health-related, behavioural and postural indicators. Additionally, after learning a location task to discriminate a bucket containing either edible food (‘positive’ location) or unpalatable food (‘negative’ location), the horses were presented with a bucket located near the positive position, near the negative position and halfway between the positive and negative positions to assess their judgement biases. The riding school horses displayed the highest levels of behavioural and health-related problems and a pessimistic judgment bias, whereas the horses living under more naturalistic conditions displayed indications of good welfare and an optimistic bias. Moreover, pessimistic bias data strongly correlated with poor welfare data. This suggests that a lowered mood impacts a non-human species’ perception of its environment and highlights cognitive biases as an appropriate tool to assess the impact of chronic living conditions on horse welfare.