In this paper is given the scientific explanation of the mutual interaction and interpenetration of geographical position, elements of the natural basis and the relevant socio-economic processes that led to territorial, demographic and functional development of the network of settlements in the Republic of Serbia. Chronologically is given the continuity in functional connections between the settlements, as well as causes, origin and legal development of the urban system in Serbia. Highlighting the problems in distribution of the settlement system of Serbia, in principle is pointed to possible directions of the spatial and functional organization of the network of settlements, in order to achieve, on the one hand, polycentric, sustainable and balanced regional development of Serbia, and on the other, to involve into the development processes of the closer and further regional environment.