Purpose - The paper aims to answer the question of what the new role of government in advanced democracies for the twenty-first century should be and what institutional and organizational capabilities are required for that role to face the challenges of globalization and the crisis of the welfare state. Design/methodology/approach - The literature on public management reform and modernization initiatives in developed countries over the last two decades, along with the growing body of literature on public governance, provide the reference framework from which the contents of the relational state are formulated. Findings - The relational state seeks to achieve the greatest possible synergy between the resources, knowledge and capacities of the public sector and those of civil society and business organizations. It does so by its ability to articulate social interrelationships and the intangible aspects involved (by using competitive or cooperative arrangements to incorporate civil society and business organizations in particular policy fields, raising society's awareness of its own responsibility, promoting social self-regulation, acting as intermediary between different social actors, providing strategic direction, etc.). Hence, the relational nature of its activities becomes the core attribute of the process of public value creation. Originality/value - The relational state locates the relations between the state, the market and civil society in the field of co-responsibility, which is a crucial but missing feature in the neo-liberal state and the welfare state models. The paper analyses emerging forms of the relational state and highlights the challenges that confront its adoption.