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Strictly speaking, any real or hypothetical state organized along the principles of socialism may be called a socialist state. The term socialist republic is used by those socialists who wish to emphasize that they favour a republican form of government. Furthermore, since socialism purports to represent the interests of the working class, many socialists refer to a state organized according to their principles as a workers' state.

According to Marxism, socialism is a stage of social and economic development that will replace capitalism, and will in turn be replaced by communism. Thus, in Marxist terms, a socialist state is a state that has abolished capitalism and is moving towards communism.

Several past and present states have claimed to follow some form of Marxist ideology, usually Marxism-Leninism. Thus, in accordance with the definition given above, they referred to themselves as socialist states. The first example was the Soviet Union, which was proclaimed a "socialist state" in its 1936 Constitution and a subsequent 1977 one. Another well-known example is the People's Republic of China, which is a "socialist state" according to its 1982 Constitution of the People's Republic of China. In the West, such states are usually known as "Communist states" (though they do not use this term to refer to themselves).

A socialist state may also be a country that uses the term "socialist" or "socialist republic" in its official name, regardless of the actual political and economic system it has in practice. Examples include the Democratic Socialist Republic of Sri Lanka, the Union of Soviet Socialist Republics, the Socialist Republic of Vietnam, and the Socialist Federal Republic of Yugoslavia.

Because there are several different branches of socialism, a country's claim to the label of "socialist state" or "socialist republic" is almost always disputed. Indeed, there are many socialists who strongly oppose certain self-proclaimed socialist republics. Trotskyists, for instance, are particularly known for their opposition to Communist states.