On Wednesday, the Supreme Court voted by three to two not to hear appeals of a ruling in September that threw out criminal charges against Echeverria and six members of his government linked to the killings.
Judge Arnulfo Castillo found that there was insufficient evidence to try Echeverria, 82, and other officials for genocide after killings during a demonstration in Tlatelolco Square, Mexico City, on 2 October 1968.
Ignacio Carrillo, the special prosecutor, was assigned by Vicente Fox, the president of Mexico, to investigate the country's so-called "dirty war" against leftist activists, hundreds of whom were killed, jailed or vanished without a trace in the 1960s and 70s.
Carrillo has accused Echeverria, who was interior secretary at the time, of masterminding a calculated government effort to attack and kill students who took to the streets that day.
Wednesday's ruling, which decreed that an appeals court should decide the matter, is yet another setback for Carrillo's office, which has largely failed in its effort to bring government officials responsible for past crimes to justice.
Former Mexican student leaders
protest outside Carrillo's office
In a statement, the special prosecutor said his office "deplores the ruling" but will nevertheless appeal to a lower court as instructed.
Judge Castillo's initial ruling came a bit more than a month after another judge refused to issue arrest warrants against the former president in a separate case, this one involving the killing of protesters during Echeverria's presidency in 1971.
The special prosecutor alleges that Echeverria ordered government thugs to attack protesters on 10 June 1971 and that dozens of students died in what has become known as the "Corpus Christi massacre".
Echeverria, who governed Mexico from 1970-76, has denied involvement in both attacks.