Social entrepreneurship has been recognised by the European Union as a creator of added value for the local community, it recognises its needs and seeks to solve them as best as it can. In the European Union, a lot is being done to raise awareness of the importance of social entrepreneurship, and there is a growing trend towards social enterprises, and their positive impacts on employment and tackling social problems are becoming more significant. Therefore it is necessary to analyse its significance and factors that encourage its further development. In Croatia, the phenomenon of social entrepreneurship at the institutional level is insufficiently investigated and its development and legal regulation are not sufficiently encouraged and the reason is most likely the complexity of the phenomenon itself. The adoption of the Strategy for development of social Entrepreneurship in the Republic of Croatia for the period of 2015. to 2020. indicates that the State recognized the importance and development potential of social entrepreneurship, but from 2015. there has been no progress in promoting its development, although many state institutions and significant financial means are allocated for the necessary activities. It is particularly important that work on the legislative framework is recognized as one of the key challenges for the success of the entire development process of social entrepreneurship. The main goal of this work is to analyse the economic significance of social entrepreneurship in the European Union countries, analyse the need to stimulate social entrepreneurship in Croatia and the European Union and analyse the regulations and positive examples of legal regulation in European Union countries. Analysis of available data showed that in Croatia there is a great interest in entrepreneurship in general, and a clear legal framework of the institution of social entrepreneurship would certainly be an additional motive for young and innovative entrepreneurs to engage in this relatively new form of entrepreneurship that focuses primarily on achieving community welfare. In addition, the fact that the most developed European Union countries, as well as those with the most developed tradition and legal regulation of social entrepreneurship, have the largest number of social enterprises. Namely, the most enterprises of legal status or form of social enterprises are established in Italy and the United Kingdom, following the strategic orientation of their Governments to facilitate the establishment of such companies. Legal regulation of social entrepreneurship can make a vital contribution to the development of this form of, activity which aims to achieve community welfare through actions in a more innovative, accountable and entrepreneurial way.