The Institute for Supply Management purchasing managers' index, based on a survey of supply executives, met expectations, rising to 51.8 points from 49.8 points in June.
A reading above 50 signifies growth.
“While the overall economy continues to improve, the manufacturing sector reversed its recent trend of contraction and grew during July for the first time in five months,” said survey chief Norbert Ore, according to AFP.
The Institute for Supply Management surveys more than 400 companies in 20 industries when compiling the index.
Manufacturing accounts for about 15 percent of US economic output.
Elsewhere, a Labor department report showed unemployment last month fell for the first time in more than a year.
The July jobless rate slipped to 6.2 percent last month from 6.4 percent the month before, the Labor Department said.
Though the decline was caused by discouraged job-seekers leaving the work force rather than a pick-up in hiring, some analysts said the figures proves employment is a lagging indicator of economic growth.
“Consumer demand is the locomotive, and it's accelerating, but it takes a while for that to be registered on the caboose end of things,” Clearview Economics LLC economist Ken Mayland told Reuters.
“This is yet another example showing employment is the caboose in this long economic train," he added.
The US economy shed 44,000 jobs last month, the report showed.
Unless people are actively searching for a job, workers are not counted as unemployed.
About a million jobs have been lost in the US since the recession, signified by two consecutive quarters of economic contraction, ended in November 2001.
The economy, which grew at 2.4 percent last quarter, needs to grow faster than 3 percent to start adding jobs, economists said, according to Bloomberg News.