The report, by the EU Agency for Fundamental Rights (FRA), said this is the case despite the ratification of the UN Convention on the Rights of Persons with Disabilities (CRPD) by the EU and 21 member states.
The FRA says the report "captures the experiences of exclusion and discrimination" of people with intellectual disabilities or mental health problems.
The agency says it "highlights the need to move from institutional to community-based living arrangements and to "reformulate" laws and policies to make them "more inclusive".
FRA director Morten Kjaerum said, "Much still remains to be done to realise the rights of Europe's 80 million people with disabilities.
"The UN convention sets out an ambitious path to improve the situation of people with disabilities. The challenge now is to implement it.
"FRA's research illustrates that the fundamental rights of people with disabilities are lagging behind legal guarantees, particularly as austerity measures begin to bite.
"This work provides the basis for discussions of practical measures that will make a difference to their daily lives."
The FRA looked into the experiences of independent living of people with intellectual disabilities and people with mental health problems in nine member states.
Read more of Martin Banks' The Parliament article HERE.