An elderly man and an 18-year-old boy were among those killed when Thai army rangers opened fire on a pick-up truck on Sunday night in Pattani, one of three Muslim-dominated southern provinces plagued by years of violence.
Troops said they had heard a gunshot before the shooting, which also injured three other teenage boys and a 76-year-old man. Survivors said the truck was carrying mourners returning from a funeral, according to local police.
"Today we are not convinced that we are absolutely in the right because the four victims are not militant sympathisers," said Deputy Prime Minister Yutthasak Sasiprapa, who oversees Thai national security.
He said the probe would assess whether the proper procedures had been followed by paramilitaries, adding that if it was found that the men were shot in error, the state would apologise and pay compensation.
Prime Minister Yingluck Shinawatra also commented on the incident, amid concerns that the deaths could deepen discontent in the south.
"If these people are really civilians, as it has been reported, then we are ready to remedy the situation," she told reporters.
A complex insurgency, waged without clearly stated aims, has riven Thailand's deep south near the border with Malaysia for years, resulting in a heavy presence of government troops, supported by armed paramilitaries.
Struggling to quell the unrest, authorities have imposed emergency rule, which rights campaigners say effectively gives the army legal immunity.
Sarawut Aree, at the Muslim Studies Center of Bangkok's Chulalongkorn University, warned that the shooting could worsen the bloody conflict in the region by exacerbating local tensions.
"Several incidents, including this one, have caused mistrust between the state and local Muslims, and among Buddhist and Muslim residents," he said.
"If this was the fault of the authorities, they must remedy it quickly or it will increase sympathy for militants."
Officials have suggested that the people in the pickup truck could have been used as human shields by an insurgent who was on the run from authorities.
Two guns were found in the truck, according to a police report on the incident, although it did not reveal whether either had been fired. Police said the driver told officers that the weapons did not belong to the passengers.
In Yala, another insurgency-prone province, Islamic clerical leader Ma Samae said he was not satisfied by the army's explanation of the shooting.
"Authorities said that militants mixed with villagers who were returning from funeral prayers, but this explanation hurts Muslim sentiment," he said, adding that officials should be prosecuted if they were found to be in the wrong.
Almost 5,000 people -- both Buddhists and Muslims -- have been killed and 8,300 wounded since the unrest began in 2004, according to local conflict monitor Deep South Watch.
People in the region complain of a long history of discrimination against ethnic Malay Muslims by authorities in the Buddhist-majority nation, including alleged abuses by the armed forces.