Subject of this study is to analyze the current condition and circumstances in the public sector of the Republic of Serbia, in order, on the basis of gathered information, to create real preconditions for proposing a series of concrete measures and instruments that will initiate the reform of the public sector towards stabilizing the condition and circumstances on it. The basic hypothesis is that the public sector in the Republic of Serbia is low productive and efficient, irrational set, with a number of problems that are characteristic for poorly formulated and managed business systems. In the context of the confirmation of this hypothesis lies and derived hypothesis that assumes that the conditions and circumstances in the public sector directly affect the conditions and circumstances in the entire socio-economic system, and that the relationship is directly correlated, in the sense that well-designed public sector contributes to the development of socio-economic system as a whole and vice versa. The methodology used in the study includes methods of analysis and synthesis, deduction, induction and comparison. The main objective of the research is to acquire a series of information about the current condition and circumstances in the public sector, on the basis of which will concrete measures be proposed in direction to reform and develop the public sector of the Republic of Serbia. The results of the research will be useful to academics and economic policymakers, because it will provide a number of mechanisms and measures that will clearly determine the course of the reform of the public sector in the Republic of Serbia in the direction of its rationalization.