Local economic development (LED) can be defined as a process in which partners in the public, business and non-government sectors work together to create better conditions for economic growth and job creation. The LED concept is derived from the bottom-up management model, created in response to the traditional top-down model which has failed to resolve many negative regional and local processes and to reduce differences with regard to under-development. LED assumes that the local self-government, private sector and local residents have a much greater awareness of their own needs, strengths and opportunities, and are able to exploit local resources in the best possible way, thus contributing to the creation of new jobs and an encouraging entrepreneurial environment, ultimately leading to improved quality of life for everyone. It is important to note that the LED process calls for good communication, the active participation of and collaboration among stakeholders, and a clear LED strategy and policy. Interest in local economic development has grown in recent years. The adoption of the Law on Local and Regional Self-government in 2001 has broadened the sphere of action of towns and municipalities, enabling them to become increasingly more involved in the LED process. The main objective of this doctoral dissertation is to put forward a model and guidelines to ensure the successful execution of local economic development in the towns and municipalities of the Republic of Croatia. The purpose of research is to enable broader and in-depth understanding of the key elements of the LED process, analyse the economic performance of towns and municipalities, and study the application and implementation of the LED process in towns and municipalities. Thus, the main hypothesis of the doctoral dissertation is formulated as follows: The implementation of local economic development contributes towards enhancing the quality of life of the population, increasing the level of development, and ensuring the optimal use of resources. Based on the literature review and the application of appropriate scientific methods, a theoretical framework for the research was designed, and the key LED elements were defined, together with the role of resources. A LED institutional framework at the international and local levels is also depicted. The empirical part of the dissertation focuses on the analyses of secondary and primary data. Secondary data analysis was used to explore the differences in the economic performances of towns and municipalities with regard to size, the county to which they belong and the broader geographical regions in which they are located (budget analysis), and to assess the effect of educational level on economic performance. Primary data were collected using the survey method on a sample encompassing 131 towns and municipalities. To investigate LED activities and implementation, the mayors of the towns and municipalities were surveyed using a structured questionnaire. The collected data were processed using the Stata 14.2 programme and analysed using descriptive and bivariant statistical methods that included non-parametric tests. Research results revealed a statistically significant difference in the economic performance of towns and municipalities with regard to size, the county they belong to, and the broader geographical region in which they are located. A statistically significant relationship was also established between the economic performance of towns and municipalities and the educational structure of their inhabitants. A moderately strong positive relationship was confirmed between the variables “share of tax revenue in operating income” and “share of population with a university degree” and a moderately strong negative relationship between the variables “share of revenue from state subsidies in operating income” and “share of population with a university degree”. Analysis showed that the LED process is being implemented by the analysed towns and municipalities but to varying degrees of success. A statistically significant difference was partially confirmed between economic performance indicators and responsibility for LED. Almost half of the respondents (48.09 %) believe that local self-governments have neither the leading role nor the primary responsibility for the economic development of their towns or municipalities. With regard to LED planning, analysis showed that most towns and municipalities possess a development strategy (93.9 %) and that the use of resources is optimal in 66.67 % of towns and municipalities. Furthermore, it was established that towns and municipalities participate to a high level in strengthening the economy. With regard to LED funding, analysis showed there is a statistically significant difference between economic performance indicators and LED funding, that is, towns and municipalities that have earmarked funds in their budgets for LED activities are making greater efforts to increase overall revenue and receipts, relative to those towns and municipalities that do not. Ultimately, the main hypothesis was confirmed, namely LED contributes to enhancing the quality of life of the population, increasing the level of development, and ensuring the optimal use of resources. The scientific contribution of this doctoral dissertation is that it explores local economic development, a development concept that has emerged in recent years in which towns and municipalities have an increasingly greater role and responsibility for driving their own development. This dissertation also contributes to the existing knowledge by analysing and systemising the theoretical features of local economic development, local self-government and the importance of resources in implementing the LED process. The empirical research contributes by providing new and clearer insights into the implementation of the LED process in towns and municipalities in the Republic of Croatia, and into the problems and obstacles the LED process encounters. An important finding is that the economic performance of towns and municipalities is linked to the implementation of the LED process, in particular in large towns and cities, and that strategic development planning is vital for the optimal use of resources. Based on the analysed data, a model was proposed for successful LED implementation.