Sponsorship is one of the crucial marketing tools and represents, along with the promotion, perhaps most significant element of marketing communication mix or promotion mix, which is increasingly common and popular due to its many advantages. Almost all bigger organizations use it today as a part of their marketing mix, especially in fields of sport, culture and art in general. Since sport is a global phenomenon present at all levels and in all aspects of life it is no wonder that sport sponsorship is the most common and fastest growing type of sponsorship and that it has significant role in marketing. Thus, the purpose and the subject of this paper was to research the effect of sponsorship on the reputation and image of sponsors and sport clubs. In short, it was neccessary to discover to what extent sponsorship has influence on the reputation and image of sponsors, and to what extent on the reputation and image of the sponsored sport clubs. For these purposes specific goals were set before the paper, specifically the main goal and auxiliary goals as a support to the main goal. The main goal of the paper, accordingly, was to prove that sponsorship has a valuable benefit in terms of positive effect on the reputation and image of both the sponsors and the sponsored sport clubs. In order to achieve all these goals both the primary and secondary research were conducted, primary via online questionnaire and on a sample of respondents from Croatia, and secondary on the basis of similar papers. Before both researches were presented the theory behind the subject was investigated, meaning the key terms related to the paper were defined. Sponsorship was explained as being distinct from advertising and as an important promotional and (marketing) communicational tool, and sport sponsorship, as a special form of sponsorship, was specifically explained also. In addition, distinction was made between the concepts of reputation and image, where conclusion was that reputation is a deeper and broader concept than image and that it is achieved through constant validation of (all) the image(s), from which follows that the image management is also reputation management. The secondary and the primary research both brought to same or similar conclusions, and the goals of the paper were largely achieved. It was proven, thus, that sponsorship has effect on the image and the reputation of both the sponsors and the sport clubs, that it affects, to certain degree, the perceptions and attitudes of consumers and can lead to increased sales, that it creates brand value and brand awareness, that it results in a spillover of image and reputation to all participants involved in the sponsorship, and that it is more succesful longer it lasts. Main limitations to the paper can be found in the sample obtained in the primary research itself, considering it is relatively small, totals 465 respondents and covers mainly the Zagreb area. However, results are still indicative, relevant and significant, and, taking everything in account, offered advice for managment should definitely be seriously considered. Of course, there is still room for further similar or related researches, but it is clear that sponsorship should really be strategicaly though of and implemented, as the paper indeed showed.