The report was presented by Mission chief Peter Semneby, who held a news conference on Tuesday with Justice Minister Vesna Skare Ozbolt.
In the last year the State Prosecutor's Office dismissed several hundred unfounded accusations against Serbs, Semneby said.
He added that considerable progress had been made, including lesser ethnic bias, but added that the situation was still far from being perfect.
He explained that ethnic background still played an important role in trials on the local level, especially in formerly war-affected areas.
With regard to war crimes trials, Semneby stressed the importance of international cooperation, adding that the OSCE Mission would organise a conference on the northern Adriatic archipelago of Brijuni in June with the aim of strengthening cooperation between institutions processing war crimes in Croatia, Bosnia-Herzegovina and Serbia and Montenegro.
Commenting on the transfer of some cases from the Hague war crimes tribunal to national courts, Semneby said that it was up to Croatia to show that it was ready and able to assume that responsibility.
Minister Skare Ozbolt welcomed the latest OSCE report on war crimes trials in Croatia in 2004, expressing satisfaction with the fact that the Mission had noted numerous positive changes in the legislation and court practice related to war crimes cases.