Seeing that the European Union put emphasis on vocational education as a major factor of economic development and social inclusion in the European integration, significant attention is given to vocational education in terms of developing common strategies and instruments in order to achieve the set goals. The vocational education system faces a great challenge: continuous modernization of training programs and the work methods that need to be harmonized with dynamic market changes. This doctoral dissertation provides a comprehensive overview of vocational education in the Republic of Croatia, as well as a critical evaluation of its position on the labour market of the European Union. The purpose and the aim of this doctoral dissertation is to scientifically determine the usefulness and cost-effectiveness of European Union funding, as well as present the most relevant insights into managing capacities for the preparation and implementation of projects financed from European Union funds. The starting premise of this study is that vocational schools in Croatia are sufficiently involved in the processes of applying for and receiving funding from the European Union. It is considered that an increasing number of principals and teachers are participating in the process of preparing and implementing projects, resulting in greater utilization of European Union funding. Due to raised awareness of the benefits and the necessity of European Union projects involvement, both principals and teachers actively participate in the project activities, which in turn results in an increase of the use of project capacities. It is also expressed that principals and teachers have a positive opinion of the European funds, as they are aware of the potential benefits of promoting vocational innovations through their activity and they are more motivated to enter projects if they recognize it as a means of introducing innovation. It is thought that there is a connection and interdependence between the key factors and key participants in the planning and the receiving of European Union funding. Their connection through the personal involvement of each individual affects the number of successfully implemented projects. To prove the hypotheses and to test the efficiency of the process of preparing project proposals in order to improve vocational education in the Republic of Croatia, an empirical research in vocational schools of the Continental region was conducted. The empirical research was conducted through survey and it involved principals and teachers in vocational schools. The first survey was conducted in 2013, while a longitudinal study was conducted in 2016. Based on the study, it can be concluded that the application for European Union funding is a statistically significant positive predictor of improving vocational education in the Republic of Croatia. Therefore, this doctoral dissertation aims to encourage all the participants to take responsibility and the initiative to invest in vocational education, which is one of the key initiators of development, a source of growth and success in each country.