||This thesis deals with European Free Trade Association (EFTA) and its significance in current world. The author has chosen some important and interesting aspects of functioning of EFTA, and he tries to analyse them in the thesis. The introduction of this paper is devoted to the theory of economic integration in general and to different approaches towards that integration. There is also mentioned trade creation and trade diversion concept. In the following section the history of EFTA is examined and the emphasis is placed on relations of EFTA with European Communities. Next chapters deal with activities of EFTA. Primarly is discussed EFTA’s involvement in the European Economic Area (EEA), and trade relations of EFTA with third countries. Chapter about institutional background of EFTA and EEA is also included into this paper. In conclusion author evaluates EFTA’s significance in contemporary world. The prospects of further development of EFTA are also mentioned and discussed in the closing chapter.