The paper gives an analysis of water and waste management sector in the Republic of Croatia based on principles of ecological engineering. It evaluates the public utilities service sector which has a long tradition in Croatia and it outlines the future reform with the aim of increasing its efficiency. Particularly, it assesses the role of the company Croatian Waters, a specific entity the counterpart of which could hardly be found in other countries. The author is urging for innovative and environmentally-friendly decentralized solutions for wastewater treatment owing to low share of urban population, the need to protect groundwaters, surface waters and the sea, affordable cost and feasibility of phased construction, with small-scale plants...