Croatia is very close to meeting the requirements for becoming a member of the European Union (EU). Obviously, the agricultural sector and food processing chain are core issues within the negotiation process. This paper discusses the competitiveness of Croatia’s agro-food sector, specifically dairy products, within the EU-25 market. Two analytical methods are employed: (1) the domestic resource costs (DRC) and (2) the revealed comparative export advantage index (RXA). The DRC analysis is based on a 2007 survey of dairy farms. Primary data was complemented with trade figures from 2000 to 2007. The analyses indicate that Croatia’s dairy production is not competitive in its present structure. This lack of competitiveness at the farm level can be compensated somewhat at the processing level.