Coumarin is found in over 5,000 cosmetics and detergents including many well known personal care products, according to the Mintel ingredients database.
Germany-based BfR warned manufacturers and consumers that the natural ingredient may cause liver damage and trigger allergies in sensitive individuals.
Animal experiments have also indicated that high concentrations of coumarin can cause cancer, added BfR.
The research organisation said consumers could be exposed to potentially dangerously high levels of coumarin by regularly using a variety of cosmetics containing the ingredient.
BfR has analysed the amount of coumarin in cosmetics and found that the ingredient is found in a range of products and at high levels in certain perfumes.
Even skin gels, body lotions and oils contain enough of the ingredient for consumers to exhaust 20 per cent of their tolerable daily intake (TDI) of one milligram through regular use.
The TDI of coumarin is set for food and while manufacturers in the food industry must not add more than two milligrams of coumarin per kilogram, there is currently no maximum limit for cosmetics, "Consumer exposure to coumarin, which also includes cosmetics, should be reduced," said BfR president Andreas Hensel.
As well as recommending reduced overall exposure to Coumarin
, BfR warned that the ingredient should not be used at all in personal care products for infants.
BfR also called for further scientific research to discover whether coumarin has the same impact on the liver when it is absorbed through the skin and orally ingested.
In reaching its conclusions BfR assumed that the effects are comparable although it conceded that there are suggestions that coumarin may be less hazardous when it is absorbed through the skin.
The Las-Vegas based interest group The National Toxic Encephalopathy Foundation (NTEF) has also criticised the industry for using coumarin in formulations.
The campaigning organisation claims that children who were exposed to coumarin in the womb can develop behavioural problems.
It also claims that the health of heart patients is put at risk by its presence in cosmetics and fragrances.