The naming of a children's play area after IRA hunger striker Raymond McCreesh is to be officially investigated by the Equality Commission.
The commission has already been examining papers on the issues since December.
It has now found that Newry and Mourne Council may have failed to comply with the commitments made under its equality scheme.
The investigation will bring to a head a row that has been simmering for 12 years.
McCreesh, a south Armagh IRA member, died on hunger strike in the Maze Prison in 1981.
He was captured while ambushing a British Army observation post. Unionist councillors pointed to the fact that the gun he was carrying had been used in the 1976 Kingsmills massacre when 11 Protestant workmen were shot dead by the IRA.
The park, in Newry, was officially renamed Raymond McCreesh Park in 2001.
In 2008, and after complaints, a consultation was launched into the choice of name, but last December the majority nationalist council confirmed there would be no change. Yesterday the commission said the council had made commitments "to have due regard to the need to promote equality of opportunity across the nine equality groups, and to have regard to the desirability of promoting good relations between persons of different religious belief, political opinion or racial group".
The investigation will determine whether the council fulfilled these obligations fully.
The probe was welcomed by William Irwin, a local DUP MLA.
Mr Irwin said: "The decision by nationalist councillors to vote in favour of naming a play park after an IRA terrorist was not only grossly offensive to the vast majority of people, but cannot meet the council's duty to promote good relations in their area."
The investigation is likely to take several weeks to complete.