The lowest administrative-territorial unit in Serbia is a settlement, whereby the administrative criterion of dividing settlements into “urban” and “other” is inadequate for describing the rural area, which is extremely differentiated in Serbia due to various factors. Therefore, it is necessary to determine the typology of settlements in accordance with different development characteristics, with a special emphasis on areas that are lagging in development. The goal of this research is to present a rural index of Serbia. The importance of this research is reflected in the methodological improvement of the classification of rural settlements in Serbia. This approach indicates the development potential and limitations of local areas in Serbia, which is the basis for support and financing of local development programs. The results point to different categories of rural settlements: rural settlements heavily influenced by the urban center; transitional rural settlements, i.e., rural centers; socio-economically devastated rural settlements; “retired”, abandoned, disappearing rural settlements, where it is necessary to adapt strategies and policies to different types. The results of the research provide important information to policymakers where specific development strategies for different types of settlements are proposed.