"We have decided to check our conclusions," Herzl Shviro, the Justice Ministry official who headed the investigation, told Israel's Channel Two television on Thursday. He said a new probe "would be good for public hygiene".
The review follows fury among Arabs, who make up about a fifth of Israel's population, that no charges were brought. Israel fears renewed violence during demonstrations next month to mark the anniversary of the killings.
A report Shviro published on 18 September effectively shut the case, saying there was not enough evidence against specific individuals for charges to be brought.
The probe looked into the killing by police of 13 Arabs in October 2000 dispersing stone-throwing protests in northern Israel that erupted days after the start of a Palestinian uprising.
"It isn't enough, we want the last stop to be putting these people on trial"
Ahmed Tibi, Israeli Arab legislator
A Jewish motorist died in one stone-throwing attack and several policemen were injured, though none of the demonstrators was found to have used a gun.
Israeli Arab lawmakers, on a five-day protest fast, welcomed the decision to review the probe.
"This zig-zag is a change in the right direction, our public had felt as though it was slapped in the face," legislator Ahmed Tibi said. "But it isn't enough, we want the last stop to be putting these people on trial."
Most Israeli Arabs sympathise with their Palestinian brethren in the West Bank and Gaza, but have not played a leading role in the uprising.
Israeli Arabs have citizenship rights, but complain of institutional discrimination.