Industrial output increased 0.6 percent last month, the strongest gain since July 2015, after an upwardly revised 0.3 percent decline in May.
Economists polled by Reuters had forecast industrial production rising 0.2 percent last month.
The industrial sector measured by the US central bank comprises manufacturing, mining, and electric and gas utilities. It has shown halting signs of improvement after a downturn over the past 18 months caused by weak global demand, a strong dollar and the fall in oil prices.
In June, however, manufacturing output rose 0.4 percent after an upwardly revised 0.3 percent fall in May, while production of consumer goods rose 1.1 percent.
Output of automotive products jumped 5.9 percent, while machinery output was up 1.1 percent, the Fed said. Output of computers, electronics and appliances increased 1.5 percent. Business equipment production in June rose 0.7 percent after a 0.3 percent fall in May.
The Fed has become increasingly worried about soft business investment.
The index for utilities rose 2.4 percent after a 0.9 percent drop in May, while mining output rose 0.2 percent, a slight softening from its May increase of 0.3 percent.
With overall output up, the percentage of industrial capacity in use rose to 75.4 percent in June from an unrevised 74.9 percent in May.
The Fed sees capacity use as a leading indicator in deciding how much further the economy can grow before sparking higher inflation.
