WASHINGTON—A federal appeals court upheld government net-neutrality rules Tuesday, handing a defeat to cable and telephone companies trying to fend off tighter oversight of the consumer broadband business.

The divided ruling by the U.S. Court of Appeals for the District of Columbia Circuit is a major victory for the Obama administration and internet companies such as Netflix Inc. and Alphabet Inc.’s Google. They have favored net-neutrality rules as a way of preventing unfair competition from internet-service providers.

...