The massacre preceded the fall of the Nepalese royal family
The Nepalese government will restore the house in which King Birendra and his family were gunned down eight years ago, PM Madhav Kumar Nepal has said.
The king, Queen Aishwarya and seven others were killed at a family dinner by a drunk Crown Prince Dipendra who later turned the gun on himself.
He is believed to have been angry about a failed arms deal and his family's rejection of his chosen bride.
After the king's brother took power, he ordered the demolition of the house.
Only a small brick wall of the Tribhuvan Sadan, where the massacre took place, remains.
An official inquiry into the killings later concluded what was widely reported at the time - that the crown prince was responsible.
King Gyanendra, who succeeded to the throne after the massacre, was ousted from his royal seat in 2008 after the monarchy was abolished.
"The Tribhuvan Sadan must be rebuilt. It will be restored to its old position," Nepal's prime minister said on state-run Nepal Television late on Wednesday.
Prince Dipendra had 'three reasons to kill his father'
He had earlier visited the pink pagoda-roofed palace that was turned into a museum after the monarchy was abolished last year.
Correspondents say that the he massacre was a turning point in Nepal's history, leading to Gyanendra's decision to give himself absolute power in 2005.
But his direct rule was met with street protests the following year, bringing the Maoists - who had been waging a civil war against the monarchy since 1996 - into the political mainstream.
The former rebels won a surprise election victory last year and speedily abolished the 239-year-old monarchy.
In May, they resigned from the government after President Ram Baran Yadav refused to back their decision to sack the country's army chief, plunging Nepal into a new round of political uncertainty.
Speaking to the Singapore-based New Paper in March, former Crown Prince Paras Shah said that Prince Dipendra had three reasons for wanting to kill his own father.
The first was because he was angry that his father was blocking an arms deal from which he hoped to get a cut, the second was his unhappiness at the decision of King Birendra to end absolute monarchy and the third was his family's veto of his wish to marry Devyani Rana - who they considered to be unsuitable for him.