This study analyses the evolution of state institutions in 18 Central and Eastern European countries that have transitioned from authoritarian, centrally planned economies to democratic market economies. The aim is to assess the quality of their state institutions vis-à-vis those of the EU-15 and to evaluate and compare the levels of socio-economic development in countries whose convergences have followed different paths. To this end, an index to assess institutional quality was developed; one that incorporates political freedom, economic freedom, and governance quality. Sigma convergence analysis and cluster analysis were employed to identify paths of convergence and divergence. Estonia and the Czech Republic were shown to have made significant progress, while Russia and Belarus have lagged behind. Each country was assigned to one of five groups on the basis of similar convergence characteristics. Changes in GDP per capita and the HDI within the identified groups were subsequently examined. Despite overall progress, substantial disparities in institutional quality and socio-economic development persist in CEE.