Uber should be regulated like a transport company and is not simply a technology platform linking passengers with drivers, according to an opinion given in the EU's highest court.
The statement could be a set-back for Uber, which had argued it only provided technology to help drivers find passengers, if the court's judges enforce it with a ruling.
Advocate General of the European Court of Justice (ECJ), Maciej Szpunar, gave his opinion while considering a case brought by Spanish taxi drivers.
They said Uber was competing unfairly in the city by using unlicensed drivers for its service.
An ECJ statement said: "The Uber electronic platform, whilst innovative, falls within the field of transport: Uber can thus be required to obtain the necessary licenses and authorizations under national law."
The ECJ's final judgement is expected within months, and judges typically follow the opinion of the Advocate General.
Conservative MEP Dan Dalton, a member of the European Parliament's Internal Market and Consumer Protection Committee, said the opinion had significant implications for consumer driven digital services across Europe.
He said: "Consumers embrace services like Uber because they deliver good services at good prices, in contrast to old monopolies which have not kept pace with digital evolutions. Workers embrace them because they offer flexible working times and conditions.
"It is right that there are safeguards for consumers, but applying analogue era regulation to the digital world only strangles innovation and entrenches privileged monopolies.
"The European Union talks of prioritising the digital single market because of the benefits for growth and for consumers. But how exactly is it delivering for consumers when services they like and want to use are banned?"
An Uber spokesman said: "We have seen today's statement and await the final ruling later this year.
"Being considered a transportation company would not change the way we are regulated in most EU countries as that is already the situation today. It will, however, undermine the much needed reform of outdated laws which prevent millions of Europeans from accessing a reliable ride at the tap of a button."