Urbanization represents a big problem and challenges all over the world, including in Croatia, smart cities are a potential solution to such challenges. The implementation of informatic and communication technologies can greatly improve the development of cities, reduce costs, protect the environment and ultimately improve the quality of life of citizens. The goals of the work are: to describe the problems and challenges that cities face, which are the result of urbanization, then the analysis of informatic and communication technology (ICT) and the importance of their application, the implementation of a comparative analysis of the cities of Budapest and Zagreb, and a critical review of the previous analysis and proposals for improving the development of smart cities in the European Union. The database used in the work is relevant scientific literature, scientific and expert articles, and relevant city websites. The implementation of new and modern technologies can certainly improve the quality of life of citizens. The cities of Barcelona, Copenhagen and Amsterdam are examples of good practice as they implement initiatives in all or almost all areas. In general, smart initiatives in the field of health and public safety are the least represented in Europe, so all cities should definitely invest more resources in that part. The European Union and Croatia have made significant progress in the last few years in the development of smart cities.