The Cumbrian town was, judges said, an immovable fixture in Best Places to Live.
They said: “No other town offers better access to so much magical scenery, and few others can match its attractive town centre for independent shops.
“The school, rugby club and churches all play a keen role in the community and the Royal Barn tap room and Milking Parlour cow-to-cone ice cream shop are the kind of businesses that would improve any town.”
Kirkby Lonsdale has an average house price of £404,000, and has grown since 2020 by three per cent.
Other runners-up in the north west behind Trawden were Altrincham in Cheshire, Christleton in Cheshire, Prestwich in Greater Manchester and West Kirby in Merseyside.
Helen Davies, The Times and Sunday Times property editor, said: “The Sunday Times Best Places to Live list is necessarily subjective. Leave it just to statistics and you will never capture the spirit of a place.
"For that, you need to visit to take into account that ‘you have to be here’ feeling. Is the pub dog-friendly, for example? Can you live car-free? What are the schools and houses like? Is it multicultural and multigenerational, and can it offer a good way of life to lots of different sorts of people?
“Ten years ago, when we launched the inaugural list, London’s gravitational pull was strong, the working from home revolution had not yet reached our doorstep and high streets were stacked with chains. How times have changed — and how welcome that change is.
“This year we have discovered new best places to live from resurgent city centres in the north, rejuvenated suburbs across the country, hidden villages in the south west, and a commutable Scottish island.
“We hope there is something to suit everyone.”
The Sunday Times Best Places to Live covers the following regions: north and north east, Midlands, Northern Ireland, south east, Wales, south west, east, London, Scotland and the north west.
Ilkley in West Yorkshire was named as the overall Best Place to Live in the UK.
The annual Sunday Times Best Places to Live guide, which includes 70 locations, is released online today and an edited version will be available in the paper on Sunday.
The Sunday Times’s expert judges behind the guide assess a wide range of factors, from schools, transport and broadband to culture, green spaces and the health of the high street.
They look to celebrate improving towns, villages or city centres, attractive, well-designed homes and locations bursting with community spirit – which the pandemic has shown to be the most vital quality of all.
An average house price for each location has been supplied by Halifax, the sponsor of the guide, and up-to-date information on broadband speeds has been provided by Thinkbroadband.com,
the UK’s leading independent guide to broadband.