The Federal Trade Commission, which filed the lawsuit, said that this "throttling" of Internet feeds was deceptive and said that in some cases the data speeds were slowed by nearly 90 percent.
AT&T did not immediately respond to a request for comment.
More than 3.5 million customers had their Internet speeds slowed more than 25 million times because of AT&T's practice, which began in October 2011, the FTC said.
AT&T says on its support website that people who have legacy unlimited data plans can experience data slowdowns once they exceed certain limits. Customers with a 3G smartphone will experience slowdowns after using 3 gigabytes of data in a month while those with 4G LTE smartphones can use 5 gigabytes before hitting potential slowdowns.
Those who dislike the slower internet once they hit their limit are told that they can use Wi-Fi or switch to a different AT&T plan, AT&T says on its web site.
AT&T shares fell briefly on the news but rebounded to be up about 0.4 percent in afternoon trading on the New York Stock Exchange, trailing gains in the broader market.
The case is in the U.S. District Court for the Northern District of California and is Federal Trade Commission v. AT&T Mobility, LLC.