Peers voted by 114 to 93 to give the commissioner the responsibility to promote children's rights and the ability to help children bring legal proceedings.
Ministers promised to reflect on the defeat, but are unlikely to attempt to overturn the amendment until the Bill goes to the Commons in the summer.
Campaigners hope that, stung by the strength of cross-party feeling, the Government will unveil a compromise.
The amendment, tabled by a formidable alliance of Liberal Democrat peer Baroness Walmsley, Labour's Lord Puttnam, the Tories' Earl Howe and crossbencher Baroness Howe, allows the commissioner to investigate any issue relating to children's rights, including advocacy services and complaints procedures.
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