India closes criminal cases in the 2012 shootings, according to Italian marines.
Salvatore Girone and Massimiliano Latorre were granted immunity from prosecution by an international arbitration court last year.
However, the tribunal determined that India was entitled to compensation.
The Indian government chose to accept the decision and petitioned India's highest court to dismiss the lawsuits.
The court announced in April that the proceedings would be dismissed only once Italy paid the compensation amount - 100 million rupees ($1.3 million; £1 million) - that the two countries had agreed on.
On Tuesday, the two-judge panel expressed satisfaction with the compensation provided by the Italian government.However, the high-profile case hampered Rome-Delhi relations for years.
In 2012, the two marines were guarding an Italian oil tanker off the coast of Kerala, India, when they opened fire on the fishermen's boat.
The marines said they mistaken the fishermen for pirates, while Italy claimed the gunfire occurred after the fishermen ignored warnings to avoid the MV Enrica Lexie tanker.
However, Indian officials apprehended the marines in 2012 and charged them with murder. However, if they were found guilty, India said it would not use the death penalty.
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