The unemployment rate declined to 7.8 percent, the first time it has gone below 8 percent in nearly four years. The decline from 8.1 percent the month before was bigger than economists had expected.
In afternoon trading, the Dow Jones industrial average was up 60 points at 13,636. The Standard & Poor's 500 index rose five points to 1,467. The Nasdaq composite was up three points to 3,152.
Eight of the 10 industry groups in the S&P 500 rose, led by a 1.1 percent gain for materials stocks.
"We're in rally mode, so slightly positive (unemployment) numbers will do nothing to hinder that," said Ralph Fogel, investment strategist and partner at Fogel Neale Partners in New York.
Stocks were trading at their highest levels in more than four years. Both the Dow and the S&P were above levels last seen in December 2007.
The Labor Department also said employers added 114,000 jobs to their payrolls last month. That was in line with what economists were expecting, but the government also revised its estimates higher for job growth in July and August.
U.S. stocks making noteworthy moves included:
— Apple shares fell $12.02, or 1.8 percent, to $654.77. Its decline was enough to keep the Nasdaq's gains from keeping pace with other indexes.
— Zynga plunged 50 cents, or 17.6 percent, to $2.32 after the online game maker said that it expects a third-quarter loss due to weak demand and a charge related to an acquisition.
— Dow component Hewlett-Packard rose 9 cents to $15.01 after falling earlier in the day after Moody's Investors Service said it was reviewing its investment-grade credit rating for a possible downgrade after the PC and printer maker cut its profit forecast.
— Avon Products rose 98 cents, or 6 percent, to $17.20 after announcing that its chairman and former CEO Andrea Jung will step down at the end of the year. Jung had come under fire for failing to reverse the company's declines and wrap up a bribery investigation.
Stocks rose in Europe, too. The FTSE 100 index of leading British shares was up 0.7 percent, while Germany's DAX rose 1.3 percent and the CAC-40 in France was up 1.6 percent.
The dollar was trading steadily across a range of currencies, with the euro only 0.3 percent higher at $1.305.
The yield on the 10-year U.S. Treasury note rose to 1.72 percent from 1.68 percent as investors shifted money from bonds into stocks.
The price of oil fell despite the better U.S. jobs figures as investors booked gains from a big rise caused by concerns over the recent clashes between Turkey and Syria. The benchmark New York crude oil price fell $2.39 to $89.32 per barrel.
Asian stocks advanced. Japan's Nikkei 225 index closed up 0.4 percent after the Bank of Japan announced no change in the country's key interest rate. Markets in China were closed for a public holiday.