A federal appeals court on Tuesday ruled that the Federal Communications Commission can toss out rules that block internet providers from favoring some services, but it said the FCC cannot bar states from implementing their own net neutrality regulations.

The ruling by the U.S. District Court of Appeals for the District of Columbia came as a victory for FCC Chairman Ajit Pai, leader of the five-member board’s Republican majority, which sparked an outcry in December 2017 by overturning the 2015 Obama-era net neutrality rule on broadband internet services.

“Regulation of broadband Internet has been the subject of protracted litigation, with broadband providers subjected to and then released from common carrier regulation over the previous decade,” said the 186-page decision. “We decline to yet again flick the on-off switch of common-carrier regulation under these circumstances.”

Mr. Pai called the decision “a victory for consumers, broadband deployment, and the free and open Internet,” saying that the commission’s January 2018 repeal has resulted in 40% faster speeds and millions of additional Americans gaining internet access.

“The court affirmed the FCC’s decision to repeal 1930s utility-style regulation of the Internet imposed by the prior administration,” Mr. Pai said in a statement. “The court also upheld our robust transparency rule so that consumers can be fully informed about their online options.”

The decision outraged supporters of net neutrality, who have warned that broadband providers will charge more for faster speeds without the regulations requiring companies to treat all traffic equally.

“With this decision, the court demonstrates it just doesn’t ‘get it’ when it comes to an open internet,” said Common Cause special adviser Michael Copps, a former FCC commissioner. “Without net neutrality rules, Comcast, Verizon and AT&T are in the saddle and consumers are being ridden to higher prices, internet throttling, blocking and slow-lane traffic.”

He noted that the House has already passed the Save the Internet Act, which would restore net neutrality, although the bill is unlikely to clear the Republican-controlled Senate.

Commissioner Michael O’Rielly, who backed the repeal, commended the court for getting “most of the decision correct.”

“The classification issue was clearly within our authority and grounded in sound policy as it avoids the hubristic posture of a central-planning, micromanaging government, which harms innovation and reduces the benefits accruing to American consumers that are made possible by a light-touch approach,” Mr. O’Rielly said.

At the same time, he said he worried that the court’s decision to allow states to enact their own rules “seems to misread precedent and ignores technology’s structure, which cannot be segmented into intrastate portions.”

The lawsuit, filed by Mozilla and backed by 22 state attorneys general, argued that the FCC had overstepped its authority and predicted broadband giants would abuse the absence of government restrictions.

Since the 2017 repeal, five states have passed net neutrality resolutions or legislation, led by California, which agreed in a deal with the Justice Department to delay enforcing its law until the lawsuit is resolved, according to the National Conference of State Legislatures.

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