This essay is focused on formation, development and the role of intelligence agencies during the Homeland war. The goal is to ascertain in what way did the sociopolitical processes in Europe, as well as Yugoslavia, impact the founding of Croatia and its intelligence and counter-intelligence system. It is vital to get into the heart of intelligence services of Yugoslavia to see how it's methodology and modus operandi impacted the nature of intelligence services in democratic and sovereign Croatia. Development of intelligence apparatus, during the lower intensity warfare on the Croatian soil, didn't went as planned. The plan was to introduce structural changes in intelligence sector which, after badly thought out development, became even more rooted in undemocratic practices and became de facto police for the HDZ, political faction in charge during the Homeland war. The role intelligence community had during the war was in many ways positive, and negative in other. The positive side is that it waged war against the information agression against the enemies intelligence services, as well as tactical field work in supplying the informations to the heads of Croatian military services about the enemies position, their strength and numbers. The other side of the coin is the gross misuse of power in intelligence community which resulted in numerous violations of democratic principles on which Croatia was founded.