Understanding and role of literacy have been changing throughout history. Before, it was enough to know how to read and write, and today that need is much broader, as well as the definition of literacy. An individual needs to master different literacies in order to be able to manage in the global world. Technology is developing extremely fast, and literacy competencies are changing accordingly. A problem of functional illiteracy can be noticed in both developed and underdeveloped countries, and the level of formal education usually doesn't give a reliable picture of the state of functional literacy of a certain population. This paper defines the concept of literacy, describes functional literacy and determines its areas, and briefly presents the state of functional literacy in Croatia. In Croatia, there is a need to conduct a research regarding functional literacy according to a methodology used in international researches. The results of such research would enable the creation of educational policies, strategies and curricula. The results of other researches indicate that primary education in Croatia doesn't pay enough attention to functional literacy. Some causes are inadequate structure and contents of primary education, as well as inadequate working conditions of primary schools.