Three drivers had sued Uber, arguing they were employees of the company.
Being classed as contractors meant they had not been able to claim expenses or receive tips, they claimed.
Uber said few current drivers would qualify for the lawsuit, while the judge estimated the number of eligible drivers could be in the hundreds.
The lawsuit had sought to include the 160,000 drivers who had worked for Uber in California since 2009.
The ruling by US District Judge Edward Chen means that Uber drivers in California can sue as a group over whether they should have received tips.
Shannon Liss-Riordan, a lawyer representing drivers in the case, said that contrary to Uber's argument, "many thousands" would be eligible to participate in the legal action. "This decision is a major victory for Uber drivers," she said.
Lonnie Giamela, a labour lawyer in Los Angeles who has been following the case, said the ruling "sets the stage for a trial and a legal battle that will have dramatic implications for Uber's business model as well as more generally how independent contractors are viewed under California law".
Judge Chen rejected Uber's argument that there was no typical Uber driver, saying there was little evidence for that claim.
He said the drivers had much in common, including that Uber sets their pay, uses feedback from customers to evaluate them and could fire them.
The judge also found there was "no basis" to support Uber's claim "that some innumerable legion of drivers prefer to remain independent contractors rather than become employees".
An ultimate finding that drivers were employees could threaten Uber's business model by forcing it to make social security contributions and thus raising its costs.
Its use of contractors has kept costs low and allowed the company to undercut traditional cab operators, sparking protests by taxi drivers in cities including London, Paris and Rio de Janiero.
In June, a California labour commissioner ruled that an Uber driver was an employee, not a contractor. Uber has appealed against that decision.
Meanwhile, a woman who was suing Uber over an alleged rape by a driver in India has withdrawn her lawsuit.
The passenger, who reported being raped and beaten after hailing a ride with the Uber driver in Delhi last year, sued the company in a US federal court in January, claiming the company failed to maintain basic safety procedures.
Uber had argued in court filings that the woman sued the wrong corporate entity as the driver had a contract with Uber BV, a Netherlands-based entity with no US operations.
The court filing did not disclose any details about how the case was settled, and representatives for Uber and the woman both declined to comment.
A judge has allowed Uber drivers in California to take legal action to determine whether they are contractors or employees.