The 3-2 vote ushered in a new era of government oversight for an industry that has seen relatively little. It represents the biggest regulatory shake-up to telecommunications providers in almost two decades.
The new rules require that any company providing a broadband connection to your home or phone must act in the "public interest" and refrain from using "unjust or unreasonable" business practices. The goal is to prevent providers from striking deals with content providers like Google, Netflix or Twitter to move their data faster.
"Today is a red-letter day for Internet freedom," said FCC Chairman Tom Wheeler, whose remarks at Thursday's meeting frequently prompted applause by Internet activists in the audience.
President Barack Obama, who had come out in favour of net neutrality in the fall, portrayed the decision as a victory for democracy in the digital age. In an online letter, he thanked the millions who wrote to the FCC and spoke out on social media in support of the change.
"Today's FCC decision will protect innovation and create a level playing field for the next generation of entrepreneurs — and it wouldn't have happened without Americans like you," he wrote.
Verizon saw it differently, using the Twitter hashtag #ThrowbackThursday to draw attention to the FCC's reliance on 1934 legislation to regulate the Internet. Likewise, AT&T suggested the FCC had damaged its reputation as an independent federal regulator by embracing such a liberal policy.
"Does anyone really think Washington needs yet another partisan fight? Particularly a fight around the Internet, one of the greatest engines of economic growth, investment and innovation in history?" said Jim Cicconi, AT&T's senior executive vice-president for external and legislative affairs.
Net neutrality is the idea that websites or videos load at about the same speed. That means you won't be more inclined to watch a particular show on Amazon Prime instead of on Netflix because Amazon has struck a deal with your service provider to load its data faster.
For years, providers mostly agreed not to pick winners and losers among Web traffic because they didn't want to encourage regulators to step in and because they said consumers demanded it. But that started to change around 2005, when YouTube came online and Netflix became increasingly popular. On-demand video began hogging bandwidth, and evidence surfaced that some providers were manipulating traffic without telling consumers.
By 2010, the FCC enacted open Internet rules, but the agency's legal approach was eventually struck down in the courts. The vote Thursday was intended by Wheeler to erase any legal ambiguity by no longer classifying the Internet as an "information service" but a "telecommunications service" subject to Title II of the 1934 Communications Act.
That would dramatically expand regulators' power over the industry and hold broadband providers to the higher standard of operating in the public interest.
The FCC says it won't apply some sections of Title II, including price controls. That means rates charged to customers for Internet access won't be subject to preapproval. But the law allows the government to investigate if consumers complain that costs are unfair.
Industry officials and congressional Republicans fought bitterly to stave off the new regulations, which they said constitutes dangerous overreach and would eventually raise costs for consumers. The broadband industry was expected to sue.
"With years of uncertainty and unintended consequences ahead of us, it falls to Congress to step in," said Michael Powell, head of the National Cable and Telecommunications Association.
GOP lawmakers said they would push for legislation, although it was unlikely Obama would sign such a bill.
"Only action by Congress can fix the damage and uncertainty this FCC order has inflicted on the Internet," Sen. John Thune, R-S.D., chairman of the Senate Commerce Committee, said in a statement.
Also at stake Thursday was Obama's goal of helping local governments build their own fast, cheap broadband. The FCC approved petitions by Chattanooga, Tennessee, and Wilson, North Carolina, to override state laws that restrict them from expanding their broadband service to neighbouring towns.
Follow Anne Flaherty on Twitter at https://twitter.com/annekflaherty.Suggest a correction