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The first section of this paper discusses a public diplomacy concept within the international relations paradigm shift that takes place in a radically changed global environment. Public diplomacy is analyzed primarily through cultural aspects in relation to other concepts such as propaganda and 'nation branding'. The second part is dedicated to identification of the key problems that the Republic of Serbia is facing regarding conceptualization and implementation of public and cultural diplomacy. It analyzes the institutional framework and effects of international Serbian policies up to now. It points to the need for long-term synchronous involvement of different actors in the field of public and cultural diplomacy of the Republic of Serbia, in order to promote not only its political positioning and reputation in the world, but for the sake of strengthening its economic and other development resources. Recognition of public and cultural diplomacy as an effective long-term means of building the reputation and position of the Republic of Serbia in international relations is extremely important. It means to articulate the need to design a new cultural concept, which would be built into a system of values that traces the path of Serbian development. The basic question, therefore, in terms of conceptualization of public and cultural diplomacy, remains the question of the narrative. This is the new and the old question of all questions: 'Who are we, where are we going and where do we want to go?'.