The paper examines the modern challenges of forming the innovation system and offers recommendations for the development of the innovation system of Georgia. The aim of the study is to identify challenges and present development mechanisms and strategies by observing the modern trends of the innovative system of Georgia. The work is based on qualitative and quantitative research methods. The methods of functional analysis, logical approaches and comparison of results are used within the framework of qualitative research. In quantitative research, we were guided by statistical data analysis and quantitative data comparison methods. The scientific novelty of the research is the mechanisms for improving the functioning of the innovation system and the development concepts. The practical value of the work is determined by taking into account the research results and recommendations presented in it and by its implementation in practice by the relevant structures.