Serbia has developed a legal system of state regulations of the European continental type. The majority of legally relevant relations are governed by norms in the form of laws and other general legal acts adopted by bodies of the legislative and executive branches of government. In accordance with the principle of division of power proclaimed by the constitution, courts are obliged to consistently apply general rules. Judges should apply the law, not create it. In other words, jurisprudence is not considered to be a formal source of law. However, in reality, courts have always played a much more significant role in the process of shaping the legal system. This role has ranged from a very broad interpretation of statutory rules to the creation of individual rules in order to fill legal lacunae, and even creating general legal rules. Evidence of this are the numerous examples from the history of Serbian law, which is briefly outlined in the following pages. The historical overview presents the role of courts in mediaeval Serbia, during the period of uprisings against the Turkish occupation (1804-1830), during the time of the creation of the Kingdom of Serbs, Croats and Slovenes (Yugoslavia), and in the post-revolutionary period in socialist Yugoslavia. Particular emphasis is placed on the mixed legal system with elements of judge-made law developed on the territory of the Province of Vojvodina between the two World Wars. In the second part of the paper, the role of courts in the modern law of Serbia is discussed. In that context, mention is given to constitutional approaches, current trends and the informal influence of courts in the process of shaping the legal system. A few pages have been dedicated to the problems facing courts in Eastern European in the period of transition. This primarily relates to the implementation of the community acquis which is developing at an alarming speed with far-reaching consequences for legal, economic and social stability in many countries, as well as the European Union itself. The acceptance of high and often objective unachievable legal standards widens the gap between the normative and the actual. Legal insecurity rises, and with it, mistrust in state institutions, including the courts, which carry particular responsibility for the creation of a new legal environment. The concluding segment of the paper is devoted to the role of courts in a future European law. In that context, current trends in the European Union are presented. Special consideration is given to the broad competencies of the Court of Justice of the European Communities, which delve as far as creating legal rules. Changes taking place in Europe point to the need to reconsider traditional teachings on the division of power and redefine the position of courts.