The popular image of Neanderthals as clumsy, backward creatures has been dealt another blow.
By Helen Briggs
BBC News Online science reporter
It was always thought they were a somewhat ham-fisted lot.
Neanderthals used tools and had a capacity for speech
However, computer reconstructions of fossilised bones show their hands had almost the same manual dexterity as ours.
Far from being "butter fingered", they would have been adept at using implements such as axes and knives.
The finding is important because it casts doubt on the idea that Neanderthals died out because of a physical inability to use stone tools.
Earlier evidence had suggested that our ancestors triumphed over their more primitive cousins because they were better at DIY.
"It shows it's not just because they were ham-fisted that they became an evolutionary dead end," says Clive Gamble of the Centre for the Archaeology of Human Origins at the University of Southampton, England.
Ice Age hunters
Neanderthals lived between 230,000 and 28,000 years ago in Europe, Central Asia and the Middle East.
They were skilled hunters and well-adapted to living during the ice ages.
But they started to die out after modern humans (Cro-Magnons) appeared on the scene in Europe about 40,000 years ago.
Millions of tools from both tribes of ancient people have been found. The Neanderthals made mainly flake-based tools but the Cro-Magnons created long, slender stone implements as well as carved bone and antler.
The latest research looked at fossilised thumb and index-finger bones of Neanderthals found at La Ferrassie site in France.
Scientists carried out a 3D computer reconstruction and found that the tips of their thumb and index finger could touch, giving a precision grip.
Neanderthals' demise cannot be attributed to any physical inability to use or make tools, based on this and archaeological evidence, says a team led by Wesley Niewoehner of the department of archaeology at California State University, San Bernardino.
"Rather, the explanation lies in the enigmatic reasons for the Neanderthals persistent use of a behavioural repertoire that emphasised physical strength and endurance over technological innovation," Dr Niewoehner told BBC News Online.
The research is published in the journal Nature.