The composite indicator -- which measures the view taken by households of the economic situation -- gained one point and reached 93 this month, its highest value since November 2010.
The indicator is particularly closely watched in France because household consumption is a key driver of growth in the economy.
French Prime Minister Manuel Valls said the latest data showed that growth could pick up quicker than expected.
"Insee said that when we get a rate of growth around 1.5 percent, expected for 2016, unemployment will fall. I think we can achieve that level of growth sooner," he told iTELE television.
However, Insee noted that the composite indicator still remained well below its long-term average of 100 points.
Nevertheless the new figures show that French households feel more optimistic about their personal financial situations and living standards, with consumer spending also on the rise.
The report highlighted a 13-point drop in the number of households concerned about unemployment, its lowest since May 2012.
With 3.49 million people out of work last month, unemployment is just shy of the record set in December.
The French economy expanded by just 0.4 percent last year, the same rate as in 2013. The government forecasts 1.0 percent growth this year.