Allofmp3.com sells tracks for as little as about 4p each
Record industry trade association the BPI said consumers were breaking UK copyright law because allofmp3.com was not licensed to sell recordings.
The Russia-based site, which offers albums to download for as little as £1, claims to be licensed.
The BPI said it planned to sue allofmp3.com in the UK courts but that users would not be prosecuted.
Allofmp3.com is the second most popular download site in the UK, accounting for 14% of downloads, a survey has said.
BPI spokesman Matt Phillips said: "There is no doubt it is totally illegal.
"It is illegal for them to sell the recordings in Russia or anywhere else because they are not licensed, and UK consumers are infringing copyright law because they are making illegal copies from an unlicensed source."
BPI General Counsel Roz Groome on Tuesday told the House of Commons culture, media and sport select committee that allofmp3.com's claims to be legal were false.
"We are going to sue allofmp3.com in the UK courts - we are going to seek a judgement not against the users of the site, but against the site itself," she said.
Allofmp3.com offers individual tracks for as little as about 4p, compared with about 80p on most sites.
"Because it is a professionally put together site it does look legitimate, although it should be obvious from the price that it isn't," Mr Phillips said.
"It is able to charge rock bottom prices as it doesn't pay the artists and record companies, whatever it claims."
The website says it is licensed by the Russian Multimedia and Internet Society (ROMS) and the Rightholders Federation for Collective Copyright Management of Works Used Interactively (FAIR).
But the International Federation of the Phonographic Industry (IFPI) said the ROMS licence was not legitimate and it would not cover consumers in other countries even if it was.
It said criminal proceedings were ongoing in Russia related to allofmp3.com.