Creation of an optimal fiscal space in Ukraine should become the priority task of the modern fiscal policy of the state. Perfect combination of fiscal space components can help to reach the positive results of the national economic development. Modern state of the domestic economy is characterized by fiscal asymmetric, amount of national debt, changes in GDP and its structure. The national fiscal space reformatting should be carried out substantially. There are some factors in national fiscal space, which slow down the processes of social improvement and have negative impact on the quality of a citizen’s life. These factors are formed under the influence of political, social and legal trends, as well as financial imbalances. Theoretical and practical issues of fiscal space formation and development along with the experience of the functioning and national economy evolution have been learned by such researchers as V. Heyets, Т. Iefiminko, G. Kołodko, N. Кravchuk, A. Krysovatyy, P. Kulawczuk, S. Owsiak, E. Reinert, P. Heller, J. Schumpeter, S. Yuriy. However, the challenges of modern social development confirm the importance of their thorough study. Purpose. The article aims to research the economic preconditions and features of creating the optimal fiscal space in Ukraine, which can meet the modern needs and contribute to the achievement of a high level of social welfare. In order to reach the goal of the research the following methods have been used: methods of classification, method of formalization and method of systematization. These methods have become the basis for construction the theoretical component of the functioning of the optimal fiscal space of the state and determined the interaction of its constituents. The preconditions of fiscal space forming in Ukraine have been rated. The prospects for creating its structure have been determined with the help of methods of comparative analysis. It should be noted the importance of learning fiscal space structure which is accompanied by a problem of determining the economic gist and the nature of the investigated phenomenon. Provision of the efficient mechanism of formation and effective functioning of fiscal space should be based on a thorough solution of disadvantages of divergent economic development of Ukraine and a search for ways to improve it.