Knowledge is an essential source of technological, economic and social progress. In innovation processes, knowledge is treated as a basic input used to create innovation and also as an output of these processes. Then knowledge, understood as skills and competence in the innovation process, leads to the creation of innovation. It seems obvious that the notion of a “knowledge-based economy” popular in recent years can be identified with the term “innovative economy,” so an assessment of the development of a knowledge-based economy corresponds with an analysis of the innovativeness of an economy. The measurement of knowledge-based economies and an analysis of the innovativeness of individual economies pose a challenge for economists. In most measurement methods used in the case of such economies, a summary index built on the basis of many variables, is used. The aim of the article is to assess the advancement of knowledge-based economies in European Union countries from 2000 to 2007. To estimate the development of knowledge-based economies, a summary knowledge-based economy index was built on the basis of factor analysis. An extensive range of data from the EU statistics office, the Eurostat, was used to build the index. In the research, special attention was paid to Poland’s place on the ranking list. Cyprus, Malta and Luxembourg were excluded from the analysis for lack of complete data.