Municipal self-government, as a form of decentralization within an individual local self-government unit, is one of the least researched aspects of local self-government. A more detailed elaboration of norms on municipal self-government is usually left to local self-government units. As a result, a great disparity may be observed when comparing the forms of municipal self-government within each individual state. In addition to being significant from the point of view of the functioning and organization of local self-government, municipal self-government can also be studied as one of the modalities of realizing the principle of citizen participation in formulating, drafting, decision-making and implementing public policies, which also realizes the principle of subsidiarity. The primary objective of this dissertation is a comprehensive analysis of the possibility of citizen participation in decision-making at local levels through the forms of municipal self-government in Osijek-Baranja and Vukovar-Srijem counties, and the role of municipal self-government in strengthening the European principles of subsidiarity and citizen participation in the management of local affairs in the system of local self-government in the aforementioned counties. The main research question is the state of municipal self-government in Osijek-Baranja and Vukovar-Srijem counties pursuant to the existing legal framework and according to the opinion of local political elites. After analysing domestic and foreign research, scientific literature, and appropriate European and domestic legal sources, a legal analysis of general normative acts of all local self-government units in the two counties was conducted with an aim of proving the hypotheses, in addition to an empirical research. The empirical research was conducted with a survey questionnaire sent to all mayors/heads, municipal /city council presidents and members of local committees/city districts in Osijek-Baranja and Vukovar-Srijem counties. The responses were analysed using descriptive statistics, and differences and associations between the responses provided by individual groups of respondents were analysed using appropriate statistical tests (Kruskal-Wallis H test with Bonferroni test as a post-hoc test, Mann Whitney U test, Kendall's Tau-b correlation coefficient and Ordinal Regression PLUM analysis). In addition to statistical methods, other methods used include the following: historical method, comparative method, descriptive method, compilation method, while grammatical, logical and teleological interpretation methods were used during the analysis of legal regulations. By utilizing the aforementioned research methods, it was determined that there are statistically significant differences between the attitudes of certain respondent categories regarding the role of municipal self-government and the importance of citizen participation in decision-making at local levels that are statistically significantly related to the characteristics of independent variables. It was determined that municipal self-government in Osijek-Baranja and Vukovar-Srijem counties is not an effective mechanism for citizen participation, and that it is necessary to change the legislative framework of municipal self-government in order to Europeanize it.