The flag consists of three horizontal bands of red, blue and white with no symbols.
The decision takes effect on the day of approval by the Council, and the flag will be displayed in accordance with the Constitutional Law on the Rights of the National Minorities.
The Council also discussed a request by the Czech minority to be allowed to use Czech as a second official language in the town of Daruvar, about 100 kilometres east of Zagreb.
Czech minority representative Zdenka Cuhnil said that the Daruvar Town Statute, adopted in January this year, provided for bilingualism only in villages surrounding the town, but not in the town itself.
She said that 70 per cent of all the Czechs in Croatia lived in the Daruvar area and that for that reason they should be allowed to practise bilingualism.
The Czechs account for about 18 per cent of Daruvar's population. Bilingualism was practised in the area from the 1950s until 1993 when it was abolished.
The Council recommended that the Government suspend the Town Statute and adjust it within 60 days to the Constitutional Law on the Minorities and the law on the use of minority languages and scripts.