A total of 23 Conservative MPs rebelled to support a Labour-led amendment requiring ministers to establish a body to administer the full compensation scheme within three months of the Victims and Prisoners Bill becoming law.
The proposal, tabled by Dame Diana Johnson, the Labour MP for Kingston upon Hull North, was approved by 246 votes to 242, prompting cheers in the Commons chamber.
The division list showed the Tory rebels included former ministers Sir Robert Buckland, Damian Green, Dame Andrea Jenkyns and Chloe Smith.
The defeat came despite a last-ditch attempt by the government to offer concessions in a bid to placate MPs.
Justice minister Edward Argar had said the government would amend the Bill in the House of Lords to establish the necessary structure and timescales for a delivery body to provide compensation.
But he outlined that ministers would still not act until the final report from the independent Infected Blood Inquiry has been published.
The inquiry into the scandal was due to publish its final report this autumn, but the document will now be published in March 2024 due to the "sheer volume and scale of the material".
Under an initial compensation scheme, only victims themselves or bereaved partners can receive an interim payment of around £100,000.
MPs have urged swifter action given it is estimated someone affected by infected blood dies "every four days".
Thousands of patients were infected with HIV and hepatitis C through contaminated blood products in the 1970s and 1980s.
Dame Diana, in a message posted on social media platform X, said: "I am very pleased that my amendment new clause 27 has been passed, despite government opposition.
"This will now put in law that a body will be established to pay compensation to those infected and affected by the contaminated blood scandal within three months of the Act passing.
"This is an important step forward in what has been an extraordinarily long fight for justice.
"However, it is not the end. There is still much work to be done to fully implement Sir Brian [Langstaff]'s recommendations and bring justice to those who do not have the luxury of waiting."
Haemophilia Society chief executive Kate Burt said: "The prime minister should be ashamed that it has taken cross-party political pressure and public opinion to force his Government to do the right thing and commit to a full compensation scheme for people impacted by the contaminated blood scandal."
"He fails to understand that compensation is about so much more than money. For the families of those who died, compensation is recognition of their suffering and an acknowledgement that their beloved child, parent, sibling or partner was valued beyond measure."
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