The Government has given an independent inquiry team two months to determine the facts which led to the defamation of priest Fr Kevin Reynolds by RTE.
Pat Rabbitte, Minister for Communications, has asked the Broadcasting Authority of Ireland (BAI) to investigate how the Prime Time programme went to air in May littered with mistakes.
The Cabinet agreed to order an inquiry to uncover the true facts and circumstances which led to untrue claims that Fr Reynolds had fathered a child in Africa being broadcast.
Mr Rabbitte called for the inquiry to establish whether RTE met its statutory responsibilities around objectivity, impartiality and fairness in reporting on Fr Reynolds.
The Galway priest settled a libel action against RTE out of court last week after Prime Time wrongly accused him of raping a minor in Kenya and fathering a child by her.
The terms of the settlement remain confidential but reports of a payout range from 750,000 euro to several seven-figure sums up to five million euro.
The station accepted liability, apologised on radio and television and has set up its own internal inquiry.
Richard Dore, the priest's solicitor, said he intends to uncover the source of the story who made the unfounded allegations to journalist Aoife Kavanagh.
The BAI, an independent regulator, has been asked to convene its Compliance Committee to examine the case and report back in two months.
The body monitors and enforces compliance by broadcasters relating to fairness, impartiality and enforcement of standards.