The business survey, taken midway through the month, found the diffusion index of manufacturing activity rose from minus 12.5 in February to plus 2 in March.
The component index for new orders rose from minus 7.8 to 0.5, the first positive reading in three months, the Fed said.
The employment index showed improvement with 17 percent of respondents to the survey indicating their business was hiring, while 14 percent indicated their payroll was in decline.
Companies responding to the survey also said the average workweek dropped in the month. The index for hours worked per week dropped 11 points in the March survey, the Fed said.