Since 1991 the regime of the free (since 1996 - of the special) economic zone has been in effect in Kaliningrad region. The regime has considerably determined the economic development of the region. Before 1998 drastic recession had affected traditional industries as well as construction and agriculture and most of the service industries. But after 1998, as the Russian economy began to recover from the crisis and the Russian market started to expand, the aforementioned economic regime led to high rates of production growth and to the development of a new regional economy oriented at import substitution and servicing foreign economic relations. At present, when the region has turned into an enclave within the European Union, and the "zonal" mechanism is being questioned, a threat of new drastic breakage of the established economic structure emerges, followed by unavoidable negative social consequences. The ways of modernization of the regional economic mechanism based on the improvement of the law on the Special Economic Zone are analyzed in the article.