The European Court of Justice has determined that lift-sharing app Uber is an ordinary taxi company and should be regulated as such.
"The service provided by Uber connecting individuals with non-professional drivers is covered by services in the field of transport," the ruling said.
Uber claims it is merely a service provider, connecting consumers with drivers in more than 600 cities.
The case was brought by a Spanish taxi drivers' association that argues Uber is a taxi company and should be subject to the rules governing such businesses.
The ECJ's senior adviser, Advocate General Maciej Szpunar agreed in an opinion in May arguing that Uber "whilst innovative, falls within the field of transport".
"Uber can thus be required to obtain the necessary licences and authorisations under national law," he said.
The company reacted sharply, saying the opinion would change little in practice and only harm innovation.
"To be considered a transport company will not change the regulations we are subject to in most European countries," a spokesman for Uber said.
"It will however hurt the necessary reform of outdated laws which prevent millions of Europeans being able to find a reliable ride with just one click," the spokesman said.
The opinions given by the ECJ's advocate generals - its top lawyers - are often followed by the court's judges.
Uber has already had problems with the law in several European countries, particularly France where the company was forced to overhaul its business model.
In November, a labour court in London, where the company is threatened with losing its licence, said it had to pay the drivers a minimum wage and give them paid leave.
Uber does not employ drivers or own vehicles, but instead relies on private contractors with their own cars, allowing them to run their own businesses.
Uber has run into huge opposition from taxi companies and other competitors who say it dodges costly regulations, such as training and licensing requirements for drivers and vehicles.
Licensed taxi drivers, meanwhile, often have to undergo hundreds of hours of training, and they accuse Uber of endangering their jobs by using more affordable drivers who need only a GPS to get around.