The main objective of this paper is to present major economic and environmental trends (relations with the European Union and major progress in environmental policy) that influenced domestic environmental financing in Croatia between 2000 and 2006. Domestic environmental protection expenditure (PAC) includes expenditures by the business and public sector in key environmental domain according to The Classification of Environmental Protection Activities and Expenditure (CEPA 2000). Data needed for business sector analysis are prepared according to OECD/Eurostat Environmental Protection Expenditure and Revenue Joint Questionnaire. Public environmental expenditures are based on data obtained from state budget according to functional classification in the period 2002-2006. PAC expenditure is a „general indication of a country’s financial effort aimed at pollution abatement and control“. To be relevant for policy analysis these data should be related to other variables. The most common way to compare PAC data across countries is to relate them to GDP, to gross fi xed capital formation, or to population. One of the main conclusions of the paper is that the level of spending expressed as a share of GDP is approaching the level estimated for compliance of CEE countries with EU environmental acquis of 2 to 3 percent of GDP (total abater expenditure and general state environmental expenditure share in GDP in 2005 was 1.6 percent). When looking at the share of expenditures by environmental domain, the majority of funds are allocated to water sector and waste management sector.