State prosecutors have responded by threatening to haul the ride-hailing company before a judge unless the service is suspended immediately.
In a sharply-worded letter, lawyers with California’s Department of Justice demanded that Uber obtain a special state permit if it wants to continue.
If not, “the attorney general will seek injunctive and other appropriate relief”, the letter said.
Though there was no deadline given in the letter, Melissa Figueroa, spokeswoman for California transport regulators, said the state would take action “early next week” if Uber did not comply.
Uber began the pilot project on Wednesday with a number of Volvo SUVs fitted with sensors allowing them to steer, brake and accelerate. A person sits behind the wheel just in case.
Uber bosses and state officials have talked several times this week after California’s Department of Motor Vehicles issued a similar legal threat.
Anthony Levandowski, who heads the company’s self-driving programme, described the talks as “frank conversations” which left him unswayed.
State lawyers insist Uber’s cars are “autonomous vehicles” which need the permit to operate on public roads.
But Mr Levandowski disagrees, arguing Uber does not need the permit that 20 other companies testing the technology in California have obtained, because the Volvos have back-up drivers behind the wheel monitoring the vehicles.
That means the cars are not “autonomous vehicles” under the state’s definition, he argues.
Mr Levandowski likened the Volvos’ abilities to those of Tesla cars that have the Autopilot feature which allows them to steer without a person touching the wheel and to brake and accelerate without a person touching the pedals.
He queried why the Tesla vehicles on California’s roads did not need a permit if Uber’s cars did.
The mayor of San Francisco has sided with the state and a consumer advocacy group has suggested California should do more than force Uber to stop.
“We believe their activity is a criminal offence under the motor vehicle code, punishable with up to six months in jail,” John Simpson of the Consumer Watchdog group said.
“(Uber) CEO Travis Kalanick should be arrested immediately.”
But in a sign of the level of interest in the technology, the mayor of Beverly Hills has voiced his support for Uber testing without a state permit.