The Hong Kong Motion Pictures Industry Association (MPIA) accused the Google-owned company of "severe" copyright infringements after it found over 500 illegally uploaded clips from 200 Hong Kong films including new releases.
The videos had been viewed about 40 million times, the association said.
"This is a big blow to the Hong Kong film industry," MPIA chief executive Brian Chung told AFP.
"If copyright infringement is allowed to continue, it will deter film investors from investing in local films and it will badly affect the quality and quantity of Hong Kong films."
Movie producers in the southern Chinese city -- home of the late kung fu legend Bruce Lee and beloved of US directors such as Quentin Tarantino -- said the problem affected classics as well as new releases.
Romantic comedy "Love in the Buff", directed by Pang Ho-Cheung and starring Miriam Yeung, was uploaded in its entirety on YouTube within days of its release last month.
It was removed after distributor Media Asia filed a complaint.
Clips of award-winning "A Simple Life", which is still showing in Hong Kong cinemas, were also on YouTube, along with comedy-action film "Shaolin Soccer" and martial arts flick "Ip Man".
"As the world's biggest video-sharing site, YouTube should ensure it will do all it can to protect copyrights, such as installing filters to prevent users from uploading copyrighted videos without permission" Chung said.
Google representatives were unavailable to comment.
A German court last week ruled that YouTube is responsible when users post copyrighted music clips without permission.
Hong Kong became an international movie powerhouse in the 1970s and remains a rich source of film talent, producing stars and films that enjoy huge popularity across Asia.
But in recent years it has struggled to compete with blockbusters produced in mainland China.
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