The same magistrate ruled in February that Garzon had "consciously ignored" an amnesty decreed by parliament in 1977 by launching an inquiry into the disappearance of thousands of people during the 1936-1939 civil war and General Francisco Franco's rule.
Garzon, famous for going after international figures like Osama Bin Laden and Augusto Pinochet, appealed against that ruling, denying that he had abused his power.
Gonzalo Martinez-Fresneda, Garzon's lawyer, told the online edition of El Pais, a Spanish newspaper, that he would also appeal against Varela's latest decision.
Garzon is seen as a hero by many leftists and international human rights groups but is accused by some Spanish conservatives of harbouring grudges and of constantly seeking the media limelight with his pursuit of high profile cases.
The case against Garzon over the civil war probe was put forward by Manos Limpias (Clean Hands), a far-right group.
Guy Hedgecoe, the editor of the English edition of El Pais, said Garzon is often seen as a politically divisive figure.
"That's partly because of the cases that he has pursued in recent years," he told Al Jazeera.
"A lot of the political right insist that Garzon has been going after politicians on the right with corruption cases. But he has also gone after people on the left, he has gone after the Basque separatist group Eta.
"So the reason he is such a divisive figure is not just down to politics; it has also to do with the fact that he has gone after high-profile cases.
"One of the criticisms that has been levelled at him is that he is such a celebrity judge who goes after these big cases."
Varela's decision is likely to mean that Garzon will be temporarily suspended as a judge on Spain's high court, which is responsible for crimes against humanity, organised crime and terrorism cases.
In the late 1990s, Garzon started looking into the deaths of Spaniards in Argentina during the military regime of 1976 to 1983 and ordered the arrest of Pinochet, Chile's former military ruler.
He also indicted Osama bin Laden in 2003 over the September 11, 2001, attacks in the US.
The judge has also presided in many trials against alleged members of Eta, the Basque separatist group.
Garzon declared himself to have jurisdiction to investigate Spain's civil war atrocities in 2008 and ordered churches and government ministries to provide him any information which they had on people who went missing during the conflict and the Franco era.
He transferred the case to provincial courts several months later because of the debate which erupted over whether he had the authority to open the probe, the first ever investigation into atrocities during the civil war and dictatorship that ended with Franco's death in 1975.