The Al-Sweady inquiry will examine claims that up to 20 Iraqis were tortured and killed after a gunbattle between British troops and insurgents at a checkpoint in the southern Iraqi province of Maysan.
The British military denies the claim.
The inquiry is named after one of the dead, 19-year-old Hamid al-Sweady.
About 15 Iraqis, including a relative of al-Sweady, will travel to Britain to give evidence later this month.
Britain’s Ministry of Defense says it has already settled 227 claims over human rights violations by British forces in Iraq between 2003 and 2009.
The ministry says it has paid $23.7 million in compensation to victims.