Croatia will hold a snap election on September 11, President Kolinda Grabar-Kitarovic says.
The call follows the fall of the government after a vote of no-confidence last month.
Prime Minister Tihomir Oreskovic's five month old centre-right coalition collapsed as a result of a split between the conservative HDZ party and its junior reformist partner, Most.
According to recent opinion polls, the HDZ is trailing the main opposition party, the Social Democrats (SDP), by 10 percentage points, although none of the biggest parties is likely to win an outright majority and a hung parliament is a distinct possibility.
The conservatives will elect their new leader on July 17, with a member of the European Parliament Andrej Plenkovic the only candidate so far.
"The fact that the HDZ will have a new leader is likely to reflect positively on the party's standing and may even boost its coalition potential. However, we may again face a situation where it won't be easy to form a stable cabinet," said political analyst Ivan Rimac.
The 'Most' alliance, or perhaps another small party, could again hold the balance of power.
The European Union's newest member has one of the weakest economies in the bloc and is in dire need of a stable government capable of pursuing reforms in order to boost investment and reduce high public debt of 86 per cent of gross domestic product.