It was the biggest gain for the index since November 2014.
Economists had forecast that industrial production rose 0.3% month-on-month in July. Capacity utilization rose to 75.9%, beating the forecast for 75.6%.
Industrial production rose by a downward revised 0.4% in June, largely driven by gains in mining, utilities and autos that are not sustainable in the long term, according to Wells Fargo's Sam Bullard.