The European Court of Justice (ECJ) has ruled that Uber is a transport company and not a digital service as the ride-sharing firm had argued.
Uber argued that it was an information society service – providing a way for people to make contact with each other electronically – and not a cab firm.
The case started in Barcelona where the local authority told Uber it had to be subject to its local taxi regulations.
Uber had earlier said a negative ruling would not affect its operations.
In its ruling, the ECJ said that a service whose purpose was “to connect, by means of a smartphone application and for remuneration, non-professional drivers using their own vehicle with persons who wish to make urban journeys” must be classified as “a service in the field of transport” in EU law.
It added: “As EU law currently stands, it is for the member states to regulate the conditions under which such services are to be provided in conformity with the general rules of the treaty on the functioning of the EU.”
Before the verdict was delivered, Uber said it was confident that a ruling against it would make little difference to how the firm operates in European countries where it does meet national regulations, including the UK.
A spokesperson said: “Any ruling will not change things in most EU countries, where we already operate under transportation law.
“However, millions of Europeans are still prevented from using apps like ours. As our new CEO has said, it is appropriate to regulate services such as Uber.
“We want to partner with cities to ensure everyone can get a reliable ride at the tap of a button.”
The verdict comes after Uber was told last month that the appeal to renew its licence in London could take years, according to Mayor Sadiq Khan.
Transport for London deemed Uber unfit to run a taxi service and refused to renew its licence in September.
Its licence ran out in October, but its drivers can continue to work in London while it tries to appeal.