Markit said the figures indicate an economic recovery that is accelerating and an economy, overall, that is stabilizing.
The composite index came in at 50.5, just above the break-even point of 50, as it went into positive territory for the first time since January 2012.
The index came in a whisper above the flash index, which was set at 50.4.
The Eurozone Services Business Activity Index, new to the report, came in at 49.8, Markit said.
On the manufacturing side of the coin, business activity reached its highest level since June 2011 in July, Market said.
In the eurozone, Germany posted the highest composite index, a mark of 52.1, a five-month high. In Italy, the mark of 49.7 for July is a 17-month high. The index in France and Spain came to 49.1 and 48.6, respectively, a 17-month high for France and a 25-month high for Spain.
For July, the declining level of new business orders was the second slowest in two years. The pace of job losses, meanwhile, was the slowest in 16 months.
"Manufacturing is leading the way out of contraction, with some nations benefiting from improved export demand," said Markit Senior Economist Rob Dobson.
That said, "the real spark which will hopefully ignite the recovery are the increasing signs of stabilization in domestic markets."
Among the positive signs, "the labor market remains the main bugbear of the eurozone, as joblessness hurts growth and increases political and social tensions," Dobson said
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