Lawmakers voted by 366 to 268 for parliament to be given the power to reject the final deal Prime Minister Theresa May agrees with the EU.
That would mean parliament being able to send the government back to the negotiating table if the terms of the deal are not considered satisfactory.
Members of the governing Conservative Party joined forces in the Lords with opposition Labour and Liberal Democrat lawmakers to defeat the government for the second time.
Last week, the unelected upper chamber amended the bill to trigger Article 50 of the Lisbon Treaty, which formally begins the exit process, to guarantee the rights of EU citizens living in the U.K.
However, members of the House of Commons, where the government enjoys a relatively loyal majority, will be able to override the Lords amendments when the bill returns to the lower house.
Britain voted in June to leave the union in a referendum that was pledged by former Prime Minister David Cameron during the 2015 election campaign. Brexit will end the U.K.’s 46-year membership in the EU.
The Article 50 bill was submitted to parliament after a court ruling forced the government to seek lawmakers’ approval to trigger exit talks.
May has set the end of March as the deadline to start negotiations.