Uber is officially a transport company and not a digital service, the European Court of Justice (ECJ) has ruled.
The ride-hailing firm argued it was an information society service – helping people to make contact with each other electronically – and not a cab firm.
The case arose after Uber was told to obey local taxi rules in Barcelona.
Uber said the verdict would make little difference to the way it operated in Europe, but experts say the case could have implications for the gig economy.
An Uber spokesperson said: "This 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 and so we will continue the dialogue with cities across Europe. This is the approach we'll take to ensure everyone can get a reliable ride at the tap of a button."
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."
Analysis: Theo Leggett, BBC business correspondent
This ruling is another example of how the courts and regulators are struggling to make sense of the phenomenon known as the gig economy.
Since Uber was first launched less than a decade ago, it has repeatedly fallen foul of regulators in different countries – and has frequently been forced to change its business model as a result.
Uber saw itself as a different kind of company. Not a taxi firm, but a simple digital intermediary, an app on a phone, that connected passengers with drivers. So it didn't need to comply with often onerous national licensing laws.
It also considered its drivers to be self-employed – so it didn't need to provide them with holiday or sickness pay, for example.
This ruling sets out clearly that Uber is, in legal terms at least, a transport company. Uber itself insists that there won't be a huge immediate impact on its business, because in most of its European markets it has already conceded the point anyway and now follows local licensing laws.
But it could still affect how it operates in future and how it liaises with national governments. Uber itself has previously said this will undermine the reform of what it calls outdated laws.
On a wider basis, it could have implications for other gig economy businesses that try to portray themselves as little more than an app on a phone, connecting providers with customers; it appears the courts, so far, are taking a different view.
That could ultimately have an impact, not just on ride-hailing services, but on other gig economy services – such as couriers and accommodation providers – who operate a similar model.
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.
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