The EF-S 17-55mm f/2.8 IS USM is often called “L-grade” mainly because of its optical performance. Users and reviewers commonly rate its image quality as excellent, even comparable to or better than some L lenses.

Why it isn’t officially an L lens: Canon has not designated EF-S lenses as L, and this lens also lacks some typical L-series traits such as stronger pro-style construction and weather sealing. Compared with lenses like the 24-70mm L, it uses more plastic and generally feels less robust. Another small clue is that the hood is sold separately, unlike many L lenses.

It does include a UD element, which is one feature associated with L lenses, but that alone doesn’t make it part of the L series.

So in practice: optically, many people consider it near-L or L-like; mechanically and by Canon’s branding rules, it is not an L lens.

As for “better” lenses in that range, the provided answers don’t identify a clearly superior substitute—only that the 17-55mm is highly regarded for image quality in its class.