Justice M H Attar passed the order for a CBI inquiry after hearing the counsel for the state government and relatives of the victims of the massacre at Sailan.
"The court ordered that CBI should inquire the allegations leveled by the petitioners," Additional Advocate General A M Magray told PTI.
On the intervening night of August 3 and 4, 1998, 19 persons -- six males and 13 females -- were killed at the house of Hassan Mohammad Sheikh at Sailan village in Surankote.
The police, in its FIR, had blamed foreign militants for carrying out the killings but an inquiry conducted by the State Human Rights Commission in October 1998 ruled out the involvement of militants.
The SHRC also recommended an inquiry into the case.
The families of the victims had filed a petition for re-investigation in the case before the High Court last year.
Human rights groups have welcomed the court order.
"Today's order, while welcome, is also an indictment of the Jammu and Kashmir Police that took no action for 14 years, and in fact sought to scuttle any fair investigations into the massacre," JK Coalition of Civil Society alleged.
In a statement, the group said the struggle of the families continues as it is important to ensure that the CBI carries out a fair, speedy and impartial investigation.
"The government on its own, without waiting for court interventions, should investigate all massacres
