Serbia belongs to the European countries that had established a well-balanced network of urban settlements
during the 19th and 20th century. This was almost an imperative in territorial policy during the socialist period,
within the second Yugoslavia (1945-1991), when towns and small cities were specially supported as the main
link in urban-rural cooperation network. However, this system has been critically broken since the beginnings
of post-socialist transition. This period has brought a neoliberal market economy side by side with fading of
the role of state institutions and the overall fragmentation of space in South-Eastern Europe. As a result, the
paramount majority of towns in Serbia are shrinking today, as a sharp contrast to the rise of few big cities.
The aim of this paper is to research the official urban and territorial policy in Serbia regarding the development
prospects of towns. Their challenging current state is not well defined in local context, because urban
shrinkage as a critical indicator is a relatively new phenomenon in local urbanisation. In this situation, the
examination how relevant Serbian legislative, planning, and strategic policy documents concern the issue of
the development of (small) (big) towns vs. cities is very important and it is the backbone of this research. The
guidance to examine them is the most relevant EU documents that are framed to comprehend and systemise
the current role and future of (small) towns at European perspective. In line with this stance, this research
presents the state of art in national urban policy in the matters of town development, as well as the possibilities
how it can be modified and improved to better suits the future of Serbian towns
