This means the Government would be effectively prevented from taking Britain out of the bloc without any deal at all - the so-called "no deal" scenario.
Lib Dem peer Lord Roberts said he was deeply concerned about the sweeping powers of the government, likening to the 1933 Enabling Act conferring absolute power on Adolf Hitler. That is not letting parliament have it's say.
The peer, who as Douglas Hogg was an MP for many years, told the House of Lords the principle of parliamentary sovereignty was "fundamental to our liberties and must not be betrayed" when it came to Brexit.
He added: "This new clause is thoroughly and fundamentally misconceived".
Last night Brexiteers described the upper chamber as a "cosy cabal of Remain" as peers voted by 335 to 244 to back an amendment to the EU Withdrawal Bill which would hand MPs the power to send ministers back to Brussels if Parliament rejects the Brexit deal.
But Brexit ministers in the House of Lords have warned that the amendments will harms Britain's negotiating stance by binding the government's hands.
Toronto Stock Exchange shuts down early on Friday after widespread technical issues
EDT (1800 GMT), updating numerous times through the hour to say the issues were persisting and that an investigation was ongoing. Trading continued on other exchanges throughout Canada, including Nasdaq's exchanges.
Mrs May's difficulties are compounded by the fact that she has a wafer-thin majority in the Commons and relies on support from Unionist MPs in Northern Ireland.
It comes with rebel Tory MPs beginning to believe that there could now be a Commons majority for staying in the customs union and its single market, through membership of the European Free Trade Association.
'It is absolutely right that Parliament is able to scrutinise the final deal, and that is why we have already committed to giving both houses a vote on the final deal'.
Theresa May suffered a fresh setback to her flagship Brexit legislation after peers overwhelmingly demanded that Parliament is given extra power to stop Britain leaving the European Union without a deal.
Former Tory leader Lord Howard accused those behind the amendment of trying to "thwart the will of the British people to leave the EU".
Speaking specifically about the amendment, he said: "At best it undermines the government's ability to reach a good deal with the EU".
"We are disappointed that the House of Lords has voted for this amendment in spite of the assurances we have provided", Minister of state at the Brexit department Martin Callanan said after the vote. It would remove the possibility of a No vote leading to a "no deal". "Those who want to overturn the referendum call this the "no Brexit" amendment".