NEW DELHI—Facebook Inc.’s efforts to expand Internet access in the developing world suffered a blow Monday when India’s telecommunications regulator ruled that the social-media company’s plan to offer free access to a limited number of websites undercut the purpose of the Internet.

The regulator said Facebook’s Free Basics service violated the principles of net neutrality, which call for equal treatment of all traffic on the Internet. The new regulations ban all programs in India that offer free access to a limited set of...