The Supreme Court told one of its former judges to investigate allegations that 22 people, 19 of them Muslims, were killed in so-called "fake encounters" by the Gujarat police between 2003 and 2006.
"We want the investigation to be thorough so that truth in each case is revealed," judges Aftab Alam and CK Prasad said in an order on Wednesday.
The Hindu newspaper said Thursday the court's order was a fresh blow to Modi, who became chief minister of Gujarat in 2001 and was re-elected for a third term in 2007.
He is widely credited with having improved governance and turned the state into a economic powerhouse, but his association with religious riots in 2002 has held him back from becoming an acceptable national political figure.
Modi, who belongs to the Hindu nationalist Bharatiya Janata Party (BJP), was accused by rights groups of either instigating or turning a blind eye to the violence in 2002 which left 2,000 people, mostly Muslims, dead.
Nevertheless, the president of BJP, Nitin Gadkari, said earlier this week that Modi had "good potential" to head the party and be prime minister.
Former justice MB Shah, who heads a court-appointed watchdog to monitor police excesses in Gujarat, was asked by the Supreme Court to report back on police killings within three months.
Gujarat police in 2004 killed a women and her three companions, which was later established by the judicial watchdog to be an instance of extra-judicial killings.
And a year later the state police shot dead a Muslim man after accusing him of being a militant. Three Gujarat police officers were later charged with murdering the civilian.
Chief minister Modi's administration also admitted that the victim's wife was also slain by policemen and five years later Amit Shah, a junior state minister, was arrested in connection with the killing.
Correction: An earlier version of this article carried an incorrect map. The error is regretted.
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Modi is so thick skinned that he is acting like a wild elephant who will not move he needs a big blow to get him out of the CM chair.I hope once any outside investigating agency starts probing him then it will be hard for him to remain on CM's chair.
By the way all those 22 enountered whether muslim or Hindu would have criminal background...Its better to encounter them rather than feeding them Biryani in India jail for decades....Good Job Modi
By the way the map is wrong.... Although i was happy seeing that you guys at least accepted that you have occupied Kashmir and there fore the POK has been included in the Indian map. But may be the newspaper needs to keep a tab on their Chinese supporters cause you are showing the small part as that of China!