The Balkan nation overcame hosts Russia in the quarter-finals to reach the final four of the tournament for the first time in 20 years.
England are Croatia's semi-final opponents in Moscow on Wednesday evening, and Dalic has warned that his team should not be underestimated.
"Croatia has great players at great clubs around Europe," Dalic told Sky Sports News.
"It is true we have not made good results at major tournaments for decades, but we should not be surprised Croatia are in the last four of the World Cup given the quality of the players, which has been proven.
"The players have shown their qualities when it matters at this World Cup, and maybe will go down in history as a great generation which has gone close to the third-place finish of the 1998 World Cup.
"This is the result of our hard work, and of the quality of players who play at the likes of Real Madrid, Barcelona, Inter Milan. They have just displayed the qualities they have, that is all."
Croatia lost out to hosts and eventual champions France in 1998 but finished third in the tournament with a victory over the Netherlands in their playoff.