The change made by peers would have forced ministers to withdraw from any free trade agreement with any country which the High Court rules is committing genocide.
Conservative former ministers Nus Ghani and Sir Iain Duncan Smith led the bid to support the Lords amendment.
They also tabled an amendment which they believed retained the thrust of proposals introduced by peers while easing Government concerns, including about the role of the courts in trade deals.
But following the reversal of the Lords amendment, this amendment was not pushed to a vote.
The Government did not appear to aid its cause to dampen the rebellion when trade minister Greg Hands admitted he had not read the compromise proposal tabled by Tory colleagues.
After the vote, Tory former leader Sir Iain said MPs would continue to work on proposals – with further amendments expected to emerge when the Bill returns to the Lords.
He wrote on Twitter: “Today’s rebellion shows the Govt can’t ignore calls to bring genocide cases before UK courts. We’ll continue to work on this amendment, considering all points MPs made today.
“I hope the @UKHouseofLords will ensure an improved amendment returns to the @HouseofCommons.”
He added: “The wilful ignorance of alleged genocide and grave human rights abuses in China and elsewhere must stop, we will not sell out our values for trade deals with genocidal states.”
A total of 10 Conservative MPs also rebelled to support a separate Lords amendment aimed at giving Parliament a bigger say in the approval of post-Brexit trade agreements.
They included former ministers Tracey Crouch, David Davis and Jonathan Djanogly.
But MPs voted by 353 votes to 277 – majority 76 – to remove this Lords amendment from the Bill.
Reporting by PA