Health warnings covering nearly two-thirds of cigarette packs and a ban on menthol cigarettes across the EU have come a step nearer following a vote in the European parliament.

Menthol and other flavours will be banned from 2022, but in a blow to the UK government MEPs decided on Tuesday that most electronic cigarettes, increasingly popular as alternatives to tobacco products, need not be regulated in the same way as medicines.

Health officials and the e-cigarette industry in Britain are seeking to clarify what this means – for instance, whether companies in the fast-expanding market face the same bans on sponsorship and promotion at sports events as tobacco firms.

The Department of Health would not comment on the advertising issue until officials had studied the MEPs' decisions. But in a statement the DoH said: "We are very pleased to see the move towards tougher action on tobacco, with Europe-wide controls banning flavoured cigarettes and the introduction of stricter rules on front-of-pack health warnings.

"However, we are disappointed with the decision to reject the proposal to regulate nicotine-containing products, including e-cigarettes, as medicines. We believe these products need to be regulated as medicines and will continue to make this point during further negotiations.

"Figures out today show smoking levels in England are at their lowest since records began – 19.5 per cent – but we are determined to further reduce rates of smoking and believe this important step today will help."

The UK e-cigarette industry, which broadly welcomed the parliament's vote, said it was already in talks with the Advertising Standards Authority but added that it would not be "sensible, proportionate, reasonable or useful" to ban all advertising.

MEPs decided e-cigarettes should only be regulated as medical products if manufacturers claimed they could cure or prevent smoking tobacco – a decision criticised by the government's main medicines regulator.

They want to put the products, used by an estimated 1.3 million people in Britain by next year, on the same legal basis as gums, patches and mouth sprays aimed at helping smokers to quit but the industry says the expensive process of licensing would help force alternatives to tobacco off the shelves.

The MEPs voted to put health warnings on 65% of each cigarette pack, as opposed to a proposed 75%. At present the warnings cover at least 30% on the front and 40% on the back.

The UK government has delayed a decision on whether to follow Australia by introducing standardised packaging until there is evidence that such measures cut tobacco use, although a cross-party group of peers are hoping to force the issue into the open again in the Lords committee stage on the children and families bill, which starts on Wednesday.

The MEPs' votes in the first reading of the draft tobacco directive, which could become law next year, will be followed by negotiations with the EU council of ministers.

The Medicines and Healthcare Products Regulatory Authority had already invited manufacturers to co-operate by opting for voluntary regulation in June in advance of what it still hopes will be compulsory across Europe. "The legislative process is still not complete and there will be further negotiation. The UK continues to believe that medicinal regulation of NCPs (nicotine-containing products) is the best way to deliver a benefit to public health," said a spokesman.

Linda McAvan, Labour MEP for Yorkshire and the Humber and spokesman on tobacco issues for the parliament's Socialist and Democrat group, said: "We know that it is children, not adults, who start smoking. And despite the downward trend in most member states of adult smokers, the World Health Organisation figures show worrying upward trends in a number of our member states of young smokers.

"We need to stop tobacco companies targeting young people with an array of gimmicky products and we need to make sure that cigarette packs carry effective warnings."

Martin Callanan, the Conservative MEP for North East England, said: "Forcing e-cigs off the shelves would have been totally crazy. These are products that have helped countless people stop smoking more harmful cigarettes and yet some MEPs wanted to make them harder to manufacture than ordinary tobacco."

Katherine Devlin, president of Ecita, the e-cigarette industry association, said "the really important" decision by MEPs not to support medicines regulation meant that was now off the table.

British American Tobacco claimed the larger health warnings demanded by MEPs went "well beyond" what was needed to inform consumers of health risks from smoking while a ban on mentholated cigarettes would increase demand for black-market goods.