Two villagers and two students were gunned down on 25 March in a raid on Ban To Chut village in Pattani province, when security forces acting on a tip-off opened fire on a group of suspected militants.
In a region where killings of civilians are common and legal action against security forces is rare, initially authorities said the men were members of one of the patchwork of Muslim rebel groups waging a bloody decade-long insurgency.
"It is clear that all four people were not members of militant groups," the panel said in a statement, adding that weapons seized after the incident did not belong to the men.
"State actions have caused damage and severely impacted on the public, therefore all of the officials who were involved must be prosecuted in line with judicial process," it added.
Rights groups have for years accused Thai security forces of carrying out extrajudicial killings with impunity in the remote and inaccessible south.
Pattani police commander Kriskorn Paleethunyawong confirmed the panel's findings but dampened expectations of criminal proceedings.
"We are open and listen to all ideas and opinions but it depends on the judicial system to rule what is right or wrong," he told AFP.
Last week the commander said seven members of the security forces were being sought over the incident.
Civil society campaigners have little faith in investigating panels, saying that so far no members of the security forces have been prosecuted over civilian deaths.
The Pattani case damages a highly-publicised "hearts and minds" strategy by the military to pay villagers to provide their own security and inform on insurgent movements.
It is also likely to deepen mistrust of the ruling junta, which is trying to revive a stalled peace process with several rebel groups seeking more autonomy for the deep south.
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