The regional organizational level of government is a complex phenomenon, and the conditions and factors of territorial and functional division are particularly complex and intertwined. In that regard, both the theoretical framework and the practical contribution related to the optimisation of the regional territorial and administrative system need to be considered from an interdisciplinary and integrated holistic aspect. A significant number of papers in the scientific literature address the subject of the system of local and regional self-government and explore different solutions leading to a general model and finding a solution to the dilemma regarding the conflict between the territorial and economic consolidation and the democratic principles encountered in the optimization of the subnational level of government. Discontent about the current state of the territorial and organizational, as well as functional system on the subnational level is present in the Republic of Croatia as well, presenting a basis for the development of a general model of an optimal territorial and functional structure of the regional level of government. The new general model relies on past theoretical and practical contributions and is based on the implementation of simulation methods and transdisciplinary approach. The model also emphasizes the importance of identifying the factors that should be considered when developing an optimal structure of regional government. The conducted study tested the fundamental hypothesis that the existing territorial and organisational, as well as financial system of the Croatian regional self-government negatively impacts the efficient management of the country’s people, territory and public finance. The central part of the paper focuses on the application of the selected research model resulting in two solutions to the problem that were outlined by using the scenario model. The general model was derived to define the new subnational territorial and organizational design of the Republic of Croatia. The systemized results obtained in the study confirmed the fundamental hypothesis of the study, and the derived model of the new subnational territorial and organizational design of the Republic of Croatia helped meet the main objective of the study. The potential impact of the conducted study goes beyond the borders of the Republic of Croatia given that a range of other countries deal with the same apparent dysfunctionality or insufficient flexibility of the subnational system as a consequence of historical, traditional and other effects. In that regard, the study uses a generalized approach and contributes to both theory and practice.