The alpine country placed 23rd out of 49 in the 2016 Rainbow Europe report and annual review conducted by LGBTI advocacy group ILGA-Europe.
The report ranked the 49 countries based on their laws pertaining to same-sex marriage, adoption, rights for transgender people and more.
Malta came out on top, mostly due to its groundbreaking laws over the past year to protect intersex people – those born with sex characteristics that do not fit into typical notions of female and male bodies.
Belgium took second place, followed by the United Kingdom, Denmark and a tie of Spain and Portugal for fifth place.
Switzerland met only 33 percent of the report's criteria for equal rights, meaning it placed behind most Western European countries plus Hungary and Albania.
Unlike an increasing number of European countries, gay marriage is not legal in Switzerland, though same-sex couples can form a civil partnership.
In its country focus, the report picked out Switzerland's recent discussions around tax reform for married couples, which included an attempt to bar marriage for same-sex couples by changing the definition of marriage in the Swiss constitution
“I think the big shock for everyone this year was the referendum on tax reform and its attempt to introduce a limitation on marriage to being union between man and woman,” ILGA-Europe advocacy director Katrin Hugendubel told The Local.
Though the initiative failed to sway voters in February's referendum, “to us it showed clearly how many countries in Europe are under attack by these rightwing forces,” said Hugendubel.
The report also highlighted the homophobic comments made by a high profile bishop last year, which led gay rights organization Pink Cross to file a criminal complaint, and the furore over a priest who blessed a lesbian couple.
Some progress is being made, however. In March the Swiss upper house of parliament voted on a change to adoption rules which would allow a gay person in a civil partnership to adopt their partner's children from a previous relationship.
The reform must still be approved by government and probably a popular referendum.
Speaking at the time Bastian Baumann of Pink Cross told The Local he was "cautiously optimistic" about the prospects for reform in Switzerland.
"I think our society is way ahead of our politics in some topics like changing marriage rights or adoption rights. The world will not stand still and the politics need to hurry so they don't lose sight."
"We need legal marriage for everyone and anti-discrimination laws,” he said.
The countries that performed the worst in the report were Monaco, Turkey, Armenia, Russia and Azerbaijan at the very bottom.
“The report shows how across the board in Europe, we need to stay vigilant and we need to stay alert about LGBTI rights,” Hugendubel told The Local.
“This year we really see a lot of complacency going on. A lot of countries have stagnated at a relatively high level, but are now starting to move slightly down the rankings because other countries are moving ahead, and others that are moving backward because they are introducing limitations on rights.”
“You can't move ahead on one thing and think the job is done,” said Hugendubel. “In the EU there's a feeling that lack of equality is only happening outside of Europe, so this is a reminder that we're not all on the right side of history quite yet.”