The Irish Haemophilia Society (IHS) has welcomed the move and is hoping the investigation will ultimately lead to prosecutions.
The society had been anxious that the Government examined the role of the companies who supplied the contaminated products after the Lindsay Tribunal refused to do so more than four years ago.
Following the tribunal's decision, the then Minister for Health, Micheál Martin, said the possibility of prosecuting the pharmaceutical companies would be assessed.
Ray Kelly, whose son, John, was infected with HIV in 1983 when he was just four years old and died nine years later, believes there can never be an end to the tragedy unless the firms whose blood products were imported into the State were investigated.
IHS chairman Michael Davenport has claimed that the risk of contamination would have been much lower if the blood products had been sourced in Europe during the 1980s but the blood bank continued to buy from the US because it was cheaper.
The former head of the then named Blood Transfusion Service Board (BTSB), Jack O'Riordan, admitted that the blood products were made from paid donations from "Skid Row" types.
It is known that a number of US companies engaged in high-risk practices in the 1970s and early 1980s, such as paying prisoners for giving blood.
A total of 106 haemophiliacs were infected with HIV and more than 200 with hepatitis C as a result of receiving contaminated blood products. All but one of the 106 haemophiliacs infected with HIV were also infected with hepatitis C. Some 87 have died.
Tánaiste and Minister for Health, Mary Harney, confirmed the department had retained Herbert Smith to investigate the possibility of taking legal proceedings.
Mr Davenport said: "Perhaps now our members will get the answers they need to bring closure to a period that has brought them much hurt and suffering."
Ms Harney also confirmed that funding would be provided as a priority for the provision of a new in-patient facility to be built at the National Centre for Hereditary Coagulation Disorders at St James's Hospital in Dublin.
The 12-bed facility will provide comprehensive in-patient care for people with haemophilia.
"This will ensure that in future people with haemophilia will be able to receive urgent treatment 24/7," said Mr Davenport.