The Lords voted 294 to 244 in favour of a change to the bill which would force the government to maintain the EU's environmental principles.
The government's environment secretary, who is now a prominent Brexit campaigner Michael Gove, is required to apply EU principles and create a public body to monitor compliance, both of which are unlikely to happen, as May is faced with uncompromising backbenchers who want a hard Brexit and an apparent majority in both houses in favour of continued membership of the Customs Union.
The cross-party amendment, which has former Tory Cabinet minister John Gummer (now Lord Deben) as one of its backers, requires the government to take steps to ensure that Brexit, "does not result in the removal or diminution of any rights, powers, liabilities, obligations, restrictions, remedies and procedures that contribute to the protection and improvement of the environment".
Today's defeat - at the third reading of the EU (Withdrawal) Bill - is the 15th for the government on the key Brexit bill.
While the more powerful House of Commons can overturn the changes, they may embolden rebels in May's own party who favour a softer European Union exit. The document is due for a final vote in the House of Commons in the coming weeks.
May's Conservative government has already suffered high- profile defeats on core Brexit issues such as whether Britain should leave the EU's single market and customs union.