This article seeks to address the pressing issue of developing the innovative activity of the domestic economy through the use of the potential of small and medium-sized enterprises, which has to do with the possibility of application of existing experience of the more developed foreign countries in order to achieve economic success. The purpose of this study is to examine the trends in the development of innovative activity of small and medium-sized enterprises in Ukraine, as well as to determine the distribution of the total amount of expenditures by areas of innovation. Analysis of the literature on this issue has shown that the economic development of a country depends on many factors, and the use of intellectual potential is quite a significant factor in modern society. The relevance of this issue is supported by the fact that the majority of developed countries that have high levels of national income and are distinguished by the quality of life of the population are introducing the latest innovative inventions and using them appropriately in: production, agriculture, trade and other fields of activity. The research of the development of innovation activity of small and medium-sized enterprises in the article is carried out in the following logical sequence: analysis of small and medium-sized enterprises in Ukraine, analysis of small and medium-sized enterprises of EU countries, evaluation and comparison of innovation activity of Ukraine and EU countries. The methodical tools of the study included methods of statistical analysis. The study period was 2010-2018. The object of analysis is the process of development of innovation activity of small and medium-sized enterprises, as they are the majority of enterprises in Ukraine. The article presents the results of the analysis of the state of innovation the activity of small and medium-sized enterprises, which showed that our country needs significant transformation in this direction. Studies show that increasing the turnover and the production of small and medium-sized enterprises depends on the level of innovative development. The results of the study may be useful for small and medium-sized enterprises.