Dorell Pinch, the deputy coroner of New South Wales, said that the journalist and four colleagues,
known as the Balibo Five, were killed to stop them exposing the invasion of East Timor by Indonesian forces.
The court concluded that Malcolm Rennie of Neilston, East Renfrewshire and Brian Peters from Bristol, Australians Greg Shackleton and Tony Stewart, and New Zealander Gary Cunningham were deliberately shot or stabbed.
"The journalists were not incidental casualties in the fighting - they were captured then deliberately killed, despite protesting their status," said Ms Pinch. She named three former senior officers from the Indonesian special forces as having ordered the killings, and suggested they could be charged with war crimes under Australian law.
The finding stokes the long-running controversy surrounding the case by contradicting the Indonesian and Australian governments' official version of events that the journalists were killed accidentally in crossfire between Indonesian troops and East Timorese defenders in the town of Balibo. Margaret Wilson, Mr Rennie's cousin, last night said: "We are delighted, but this is only partial justice for Malcolm.
"We feel great relief that the coroner has reached this decision. We now feel vindicated in what we have been saying for years. But I don't think they will be able to extradite those responsible.
"Today's outcome is certainly partial justice, and it may be all we get. I'd now like the British government to formally confirm that they accept the findings.
"I remember the shock I got when my mother told me Malcolm was dead. The version of events we got was that the journalists were sheltering in a house which had been hit by a shell, which tied in with the fact that the bodies were not brought back for burial.
"There was no reason for us to doubt that story. Then, in 1996, I watched the John Pilger documentary Death Of A Nation which contradicted what we had been told."
Mr Rennie, 29, worked for the BBC in Edinburgh and Glasgow as well as several television and radio stations in Australia.
Indonesia's foreign ministry said the coroner's ruling would not change its opinion that the men were killed in a crossfire.
In Australia, a coroner does not have the power to file charges. Ms Pinch believes the evidence supports possible war crime charges and she will refer the case to the government to decide whether to pursue them.
Phillip Ruddock, the attorney general, said he would forward Ms Pinch's recommendations to police and prosecutors who have responsibility for investigating and compiling war crime charges.
Jimmy Wray, a former Scottish Labour MP who campaigned on behalf of the murdered journalists, said: "This is wonderful news. The impetus now is for the culprits to be brought to justice."
A spokesman for the Foreign Office said: "Her Majesty's government has noted this verdict, but these findings are the outcome of an independent judicial process run by the New South Wales state coroner's court.
"It is for the New South Wales attorney general to decide how to take this forward."
HARD ROAD TO FREEDOM
EAST Timor's struggle to independence was long and traumatic, with a death-toll of at least 100,000.
Indonesia invaded shortly after Portugal withdrew in 1975 and forcefully tried to subdue the people and resistance guerrillas.
World powers were accused of contributing to the calamity by turning a blind eye or supplying weapons.
Indonesia agreed in 1999 to let the East Timorese choose between independence and local autonomy.
When the referendum overwhelmingly backed independence, loyalists went on the rampage, murdering hundreds and reducing towns to ruins.
An international peacekeeping force stepped in and paved the way for a United Nations mission which helped East Timor back on to its feet. It achieved independence on 20 May, 2002.