The Government is being urged by Labour to abandon contentious welfare reforms after a series of defeats in the Lords.
Planned restrictions on employment and support allowance (ESA) affecting cancer patients and the disabled were overturned by peers considering the Welfare Reform Bill.
The Lords also rejected a proposed one-year limit on ESA claims.
Labour said the coalition had been defeated for trying to "cross the basic line of British decency" and urged ministers not to try to reinstate the measures in the Commons.
The Government was defeated by 234 to 186, majority 48, over a plan to limit to one year the time people can claim ESA.
Peers agreed a move to replace the one-year cap with the ability for the Government to specify a limit of no less than two years.
Leading medic Lord Patel, an independent crossbench peer, said: "I am sympathetic to cutting the deficit, but I am highly sympathetic to sick and vulnerable people not being subjected to something that will make their lives even more miserable."
The Government was also defeated when peers voted by 222 to 166, majority 56, to accept another amendment by Lord Patel removing the time limit on contributory ESA payments from people receiving treatment for cancer.
Shadow welfare minister Lord McKenzie attacked the Government's proposal as "fundamentally unfair" and called for a limit to be reached after "an evidence-based process" and not chosen as an "an arbitrary figure".
But Welfare Reform Minister Lord Freud said the effect of increasing the time limit from one to two years would be £1.6 billion over five years.
He said the proposal to time-limit contributory ESA only applied to people in the "work-related activity group" and not those in the "support group" who were deemed incapable of work.
"Those in the support group and those claiming income-related ESA are unaffected by these proposals," he said.
"We will always provide a safety net for those with limited income and people will still be able to claim income-related ESA."
He said that other benefits such as housing benefit and council tax benefit would be available.
But he said it was right to time-limit contributory ESA in the same way that contributory Jobseeker's Allowance (JSA) was time-limited.
Peers also defeated the Government by 260 to 216, majority 44, to allow young people unable to work because of disability to receive the ESA.
Putting forward the amendment, independent crossbencher Baroness Meacher said the Government's plan would mean disabled children who could never work would never be entitled to the benefit. She said it would leave them dependent on means testing and they would receive no income at all if their partner was earning.
Lady Meacher told peers: "These young people have conditions so severe that they are entitled to be supported.
"It really puts them in a completely different category from other people who grow up, are able to earn, able to build up capital, able to gain contributions. They are surely in a category of their own."
Shadow work and pensions secretary Liam Byrne said: "The Government has been defeated tonight because quite simply they tried to cross the basic line of British decency.
"For months Labour has been determined to stop this cruel attack on cancer patients in its tracks. And today the House of Lords agreed. The Government's proposal to cut paid for benefits for people still in chemotherapy crosses the basic test of fairness."
He said the Government should now "do the decent thing and take these proposals off the table".
A spokesman for the Department for Work and Pensions said: "Our plans are about returning the welfare state to its original purpose of supporting those with the most need. This means ensuring that taxpayers' money is spent on those who are too sick or disabled to work and those with the least money.
"ESA is for people who could be expected to get back into work and was never intended to be a long term benefit.
"The time-limit of one year strikes the best balance between recognising that some people need extra help to enter the workplace and that the taxpayer cannot afford to support people indefinitely who could be in employment."