Patients on Acomplia, also called rimonabant, have double the risk of psychiatric problems, the European Medicines Agency has been told.
It has now recommended suspending the drug's licence and doctors have been told not to issue new prescriptions.
Anyone already taking the once-aday slimming pill should see their GP.
The pill has already been banned in the US over fears it can heighten the risk of depression and suicide.
It went on sale in Britain in June 2006 but approval from the National Institute for Health and Clinical Excellence was only issued in June this year.
Around 97,000 obese or overweight people in the UK have been prescribed the drug, with more than 700,000 using it worldwide.
Last year GPs were warned not to give the pill to patients with a history of depression, suicidal thoughts or on antidepressants.
But yesterday the EMEA pulled the drug off the European market altogether saying its benefits "no longer outweigh its risks".
Its maker, Sanofi-Aventis, said it would comply.