Spatial-functional influence of sub regional center Prijepolje affects mostly three municipalities: Prijepolje, Priboj and Nova Varoš. This influence reflects on transformation of settlements caused by urbanization and industrialization on one, and deagrarization and depopulation on the other side. In this paper, demographic and functional components, which determinate development of settlements in this area and structure of population and settlements, have been analyzed. They brought to differentiation areas on three urban centers, three per urban ring and rural surroundings. Decentralization of this area has been done to the model of villages groups which are derived from concentration of functions and locations of public-social objects in settlements. On this model functional organization and hierarchy of nodal center has been deducted in this area.