Year-to-date the total market also fell, by 1.2% (or 83,234 units) to 6,834,243 units, according to data from JATO Dynamics, automotive data and intelligence provider.
Peugeot's new 207 model was Europe's best selling car in May with 40,446 units registered.
The Ford Focus has jumped three places into the second slot with 39,996 units registered and the Volkswagen Golf remains in third position with 36,471 units registered. The Fiat Punto, Vauxhall Astra, Ford Fiesta, Vauxhall Corsa, BMW 3-Series, Renault Clio and VW Passat make up the remaining top ten places.
"Today's European car market is a challenging environment", says Nasir Shah, JATO's international sales and marketing director.
"We continue to see the importance of new products in the fight for market share. The product lifecycles for cars are getting progressively shorter as manufacturers clamour to win the attention of consumers with new models, and those manufacturers with aggressive product development strategies continue to reap the rewards.
"In recent months, the strong sales performances posted by the new 207, Corsa and Grande Punto are testament to this," he added.