The aim of this paper is to present legal arrangement of the institution of expropriation in the Croatian legal system, with a particular emphasis on compensation for expropriated real estate, as a conditio sine qua non of the expropriation procedure. Expropriation can be defined as a legal institution which enables public authorities to, by means of an authoritative act, based on the law, with an undoubtedly established interest of the Republic of Croatia, seize the right of ownership of an individual for the purpose of construction of buildings or other construction work that could not be executed in any other way. First part of the paper defines the term and theoretical characteristics of the institution of expropriation. The object of expropriation, the user and types of expropriation are defined. Furthermore, necessary requirements are stated, the expropriation procedure itself and the decision making process are described in detail. The main part of the paper is focused on compensation for the expropriated real estate as an essential element of expropriation. The development of compensation throughout history on the Croatian territory and the difference between market and fair compensation are explained and the determination of the compensation by application of special law is showcased. Finally, problems in the application of the market compensation system are highlighted. In the concluding part, personal views and concluding considerations regarding the subject institution are presented.