It said Croatia’s legal framework to deal with organized crime and corruption was adequate, but some changes to the legal system had not been fully implemented or were being used half-heartedly.
Croatia needed to use tougher sentencing to deter crime, the report said, noting that convicted criminals often face only suspended sentences.
An EU official said the Commission would watch corruption, but the bloc was convinced Croatia was on the right path.
“We believe that the process itself has been solid and credible, and that the process that has started in Croatia is irreversible.”
He said the situation in Croatia was different to Romania and Bulgaria, whose efforts to fight corruption and improve the rule of law are still under European Commission monitoring.
Croatia, like Romania and Bulgaria, will not automatically become a member of the passport-free Schengen zone, but Croats will have the right to seek work in other EU member states, unless they impose a restriction of up to seven years like they did in 2007.
The seven-year restrictions on the movement of Romanians and Bulgarians in the European Union are due to expire at the beginning of 2014.
Although EU countries could request Croatia be given the same type of seven-year movement restrictions, EU officials said no country had made that request.
The Commission report will be presented to EU countries for approval, as well as the European Parliament, which will discuss Croatia on April 18.