The index, which measures progress in human well-being, surveyed 187 countries and territories and takes into account life expectancy, literacy, school enrollment and gross domestic product per capita.
The United Nations Development Program, which issued the rankings, said Norway retained its top ranking from last year, followed in the top 10 by Australia, the Netherlands, the United States, New Zealand, Canada, Ireland, Liechtenstein, Germany and Sweden.
The report said when the HDI was adjusted for economic inequality, the ranking of the United States fell from four to 23, South Korea from 15 to 32, and Israel from 17 to 25.
In contrast, other countries' standings improved after the HDI has been adjusted for inequality, with Sweden jumping from 10 to five, Denmark from 16 to 12, and Slovenia rises from 21 to 14.
"The inequality-adjusted Human Development Index helps us assess better the levels of development for all segments of society, rather than for just the mythical 'average' person," said Milorad Kovacevic, HDI chief statistician.
The report said countries at the bottom of the list still suffer from inadequate incomes, limited schooling opportunities, low life expectancy rates and armed conflicts.
North Korea was among the countries not included in the index due to a lack of data, the report said.
Wisconsin business offering 'therapeutic cuddling' forced to close
Workers accuse National Zoo of animal mismanagement