Cost benefit analysis can be defined as a key tool for making investment decisions or for comparing different options. This method means that before making any decision, it is necessary to analyze the situation, which involves identification of costs and benefits, that is, positive and negative impacts from financial and economic point of view. Application of this analysis can be of great help when it comes to making decisions because it points out the fact whether a project is justified and to what extent. This analysis is based on philosophy which indicates the fact that it is not possible to implement a project that will not harm anyone, therefore it is always necessary to take care of the impacts on society that could result from a particular project. Due to the fact that application of this analysis has not still developed enough in Europe, there is a need to conduct a research on its application. Considering the importance of use of this method, the aim of this graduation thesis is to establish the extent to which cost benefit analysis is applied in the Republic of Croatia, more precisely, in local and regional selfgovernment units and development agencies. The aim is to determine purpose of application of this analysis and its performers, to determine whether there are organized educations for employees and to establish whether units and agencies raise awareness of importance of this analysis, to determine its key elements and the main obstacles.