Home Minister Ramesh Chennithala said the government's decision was based on recommendations of the Special Investigation Team that probed the petition of the slain leader's wife, who alleged that senior CPI-M leaders were involved in the conspiracy leading to killing of her husband.
He said the SIT had given a number of points and opined that it was proper to have a probe into the conspiracy angle by another investigative agency.
The home minister said the SIT report had stated that the accused travelled to neighbouring states like Goa, Maharashtra and Karnataka after the crime and that they were suspected to have received help from CPI-M leaders.
He also said opposition leader V S Achuthanandan's request for a CBI probe into the murder citing the alleged links of the accused with a COFEPOSA detenu in connection with a gold smuggling case also required investigation by another agency.
Chandrasekheran's murder evoked much political heat in the state as he was a CPI(M) rebel who floated a parallel Left outfit called Revolutionary Marxist Party in his home turf Onchiyam in north Kerala. He was hacked to death in May 2012.
Last month, a special court sentenced 11 persons, three of them local CPI(M) functionaries, to life imprisonment.
However, CPI(M) has maintained that ordering a fresh probe would be illegal and was politically motivated.
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