England's Court of Appeal dismissed an attempt by campaigners to overturn an earlier High Court ruling that upheld the British government's decision not to hold a formal probe into the Batang Kali killings in then British-controlled Malaya.
In December 1948, British soldiers shot and killed 24 men at the Batang Kali rubber plantation in Selangor state before setting the village on fire.
The incident, which has been referred to as "Britain's My Lai" after the infamous Vietnam War massacre, happened during the so-called Malayan Emergency, when British troops conducted military operations against communist insurgents.
Families of those who died have challenged the official account that the men were killed as they tried to escape, and want a full public inquiry to establish what happened.
In a written ruling on Wednesday, three Court of Appeal judges said that their analysis of the issues, including human rights and international law, led them to conclude that "these appeals fall to be dismissed".
However, lawyers for the families said they would take their case to the highest court in England and Wales, the Supreme Court, and ultimately to the European Court of Human Rights.
Quek Ngee Meng, a spokesman for the families, said: "Despite the dismissal of the families' appeal, our journey to seek redress and justice has not come to an end.
"The destination is not too far off either. Either UK human rights law needs to catch up with Europe with the help of the UK Supreme Court, or the families will need to go to Europe for satisfaction."