The Markit Eurozone Purchasing Managers' Index for the eurozone reached 47.9 in January, which beat an earlier "flash" estimate of 47.5 and December's reading of 46.1, Markit said.
While yet to reach the break even point of 50, the index continued an upward trend, starting out the year at its highest level in 11 months.
Markit noted the index, which hit a recent low in October, remained below 50, "signaling contraction for 1 1/2 years."
Ireland and the Netherlands posted PMI levels above 50, with readings of 50.3 and 50.2, respectively.
Germany posted a PMI level of 49.8, just below break-even, but an 11-month high for the largest economy in Europe. Austria's PMI came in at 48.6, followed by Italy, Spain and France at 47.;8, 46.1 and 42.9, respectively.
"The Eurozone economic picture continues to brighten," said Markit Chief Economist Chris Williamson.
"The survey continues to signal an overall deterioration of business conditions, but rose to an 11-month high to suggest that the industrial sector is close to stabilizing after contracting throughout
much of last year," he said.