Tobacco retailer licencing has been recommended as an effective tobacco control strategy. In most European countries, however, retailers do not need a licence to sell tobacco products. We aimed to stimulate a discussion on the potential for tobacco retail licencing in Europe by describing (1) potential public health benefits, (2) licencing methods and (3) barriers and success factors in adoption of licencing systems. There is limited scientific evidence, but tobacco retail licencing may reduce smoking in three ways: (1) improved enforcement of and compliance to existing point-of-sale tobacco control policies (eg, minimum age of sale), (2) a reduction in the number and/or density of tobacco retail outlets and (3) denormalisation of tobacco. Licencing systems may take diverse forms. Systems may make licences expensive, and set criteria for purchasing a licence and retaining the licence after first purchase. In Europe, licencing systems have been implemented in Finland, Hungary, France, Italy and Spain. Licencing in Finland and Hungary was adopted for public health reasons; in Finland, with strong public support. In France, Italy and Spain, tobacco sales were state-monopolised, driven by economic motives. The cases of Norway and Scotland show that adoption of retail licencing may fail when political support is insufficient and tobacco retailers organise opposition with support from the tobacco industry. In conclusion, tobacco retailer licencing is a promising method to contribute to tobacco control efforts. Placing tobacco retailer licencing in a child protection framework may help generate the strong political and public support needed to effectively adopt licencing systems.