Airbnb faces a warning that its terms and conditions fall foul of EU consumer rules, especially on pricing.
The European Commission has told the company to inform consumers up-front the total cost of renting a property, including service and cleaning charges.
When this is not possible, it should at least make them aware that there may be additional sums to pay later.
Airbnb should also make clear if the offer is made by a private individual or a professional, the Commission said.
Consumer protection rules differ according to which of the two applies.
The European Commission has raised various other points with Airbnb on which it is not complying with EU law, including denying consumers the basic legal right to sue a host in case of personal harm or other damages.
Airbnb has until the end of August to present its proposals for change.
The company could face an enforcement action if they are not considered satisfactory.
EU commissioner for justice, consumers and gender equality, Věra Jourová, said: “More and more consumers book their holiday accommodation online and this sector has brought many new opportunities to holidaymakers.
“But popularity cannot be an excuse for not complying with EU consumer rules.
“Consumers must easily understand what for and how much they are expected to pay for the services and have fair rules, eg on cancellation of the accommodation by the owner. I expect Airbnb to follow up swiftly with the right solutions.”
Airbnb said it was looking into the issues brought to its attention by the European Commission.
“We take this issue seriously and are committed to being as transparent as possible for our community,” a spokesperson told the BBC.
“Guests are made aware of all fees, including service charges and taxes, prior to confirming their decision to book a listing, and we will work together with the authorities to clarify the points raised.”