The aim oft his thesis is to define and explain more precisely financial institutions and the money markets, including also their integral partswhich are related to the participants and financial instrumets. In addition, this thesis wants to emphasize mutual influence and connection of financial institutions and money markets, and indicate some of the possibbilities for the development of the Croatian financial system. Financial instruments, institutions and markets represent essential and mutually related elements of each country's financial system. Financial institutions and markets play a key role in the development of the economy, as they throught heir activities, contribute to more efficient transfer and allocation of cash surpluses. Unlike the United States financial system, the financial system of the Republic of Craotia is less developed and it has a smaller number of participants and financial instruments. The financial system of the Republic of Croatia is becoming more developed and is taking on the features of developed financial systems. Zagreb Money Market gives a significant contribution to the development ofthe Croatian money market throught transparent trading and the formation of market interestrates. An important role in the development of the financial system of the Republic of Croatia it has the state itself and the Croatian National Bank. It is important to develop a safe, efficient and inexpensive system for all market participants. The development of financial system cannot be reduced only to legislative regulation, but that is what it takes to start creating conditions for further development.