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Abstract: The effective and rational energy generation and supply is one of the main presumptions of sustainable development. Combined heat and power production, or co-generation, has clear environmental advantages by increasing energy efficiency and decreasing carbon emissions. However, higher investment cost and more complicated design and maintenance sometimes-present disadvantages from the economical viability point of view. As in the case of most of economies in transition in Central and Eastern Europe, Croatia has a strong but not very efficient co-generation sector, delivering 12% of the final energy consumption. District heating systems in the country''s capital Zagreb and in city of Osijek represent the large share of the overall co-generation capacity. Besides district heating, co-generation in industry sector is also relatively well developed. The paper presents an attempt to assess the sustainability of Croatian co-generation sector future development. The sustainability assessment requires multi-criteria assessment of specific scenarios to be taken into consideration. In this respect three scenarios of Croatian co-generation sector future development are taken into consideration and for each of them environmental, social and economic sustainability indicators are defined and calculated. The assessment of complex relationships between environmental, social and economic aspects of the system is based on the multi-criteria decision-making procedure. The sustainability assessment is based on the General Sustainability Index rating for different cases reflecting different criteria and their priority. The method of sustainability assessment is applied to the Croatian co-generation sector contributing to the evaluation of different strategies and definition of a foundation for policy related to the sustainable future cogeneration sector development. [Copyright &y& Elsevier]