An independent commission laid most of the blame for the 26 October deaths on Lieutenant-General Pisarn Wattanawongkeeree as well as the assistant national police chief, Lieutenant-General Wongkot Maneerin, and Interior Ministry deputy permanent secretary, Siva Saengmanee.
It found that the deaths were due to the mishandling of the situation by the three officials and not deliberate acts to kill or harm protesters.
The military, unhappy with the report, had launched its own probe after the government-appointed independent commission released its report in December.
Security forces had said they were breaking up a riot in Narathiwat in southern Thailand.
Muslim community leaders and rights groups have accused Thai Prime Minister Thaksin Shinawatra of heavy-handedness in the south.
The officials are unlikely to be sacked, the Defence Minister Sumpan Boonyanun said. "I have received the investigation's report about their conduct but the punishment decision is up to me and I haven't decided yet."
Human Rights Watch says Thai
forces operate with impunity
"I looked at the report briefly and see that their punishment should not be dismissal but transferral from theirs positions. However, I will look at the details again," he said.
Wattanawongkeeree, was transferred from his position overseeing the kingdom's south in November in the wake of the incident, which triggered an international outcry.
"The three of them have worked for the nation. If they have done something wrong, they will be punished but we have to consider whether the punishment will demoralise them," Sumpan said.
"If we punish them too hard, no one will dare to do anything because they will be afraid of being punished."
Human Rights Watch
Incidentally, on the eve of the 6 February general election, the executive director of New York-based Human Rights Watch's Asia director, Brad Adams, wrote a scathing open letter to the Thai prime minister.
"If we punish them too hard, no one will dare to do anything because they will be afraid of being punished"
Thai Defence Minister
"Since your government assumed power, Thai security forces have increasingly used excessive force and operated with impunity, particularly in southern Thailand," he wrote.
"Preliminary information received by Human Rights Watch indicates that Thai security forces used excessive force in breaking up the demonstration in front of Takbai police station on 26 October."
In the same letter, Adams had welcomed Thaksin's "quick appointment of a commission of inquiry to investigate [the Takbai police station] incident", but notably had cautioned that "for this inquiry to help stem the already rising cycle of violence in southern Thailand, it must be - and be perceived to be - a credible and legitimate exercise, and not, as you publicly suggested, simply an effort to yield "lessons for the future".