Decentralisation is a very complex relationship between the central level and the local level of government. Decentralisation leaves jobs from the central government to local and regional units of government. The decentralisation process in Republic of Croatia covered administrative and fiscal decentralisation. This paper explains what decentralisation is, and then analyses fiscal decentralisation in Republic of Croatia in detail. The course of decentralization in Republic of Croatia and its most important characteristics are presented. The most important advantages and disadvantages of fiscal decentralisation are outlined. In order to understand the implementation of fiscal decentralisation in Republic of Croatia, the establishment of local and regional self-governments was explained. Local self-government in Republic of Croatia consists of 428 municipalities and 127 towns, while regional self-government consists of 20 counties plus the City of Zagreb. After that, the ways and sources of financing of local and regional units were clarified. It specifies which jurisdiction the municipalities and cities are responsible for, and for which counties. Some of the units do not have enough fiscal capacity to exercise their responsibilities, therefore there is fiscal alignment. Fiscal alignment strives to match the existing inequalities between local and regional self-governments.