South Australia's Attorney-General Kyam Maher had requested a review of the SA Parole Board's decision in August to grant parole to Vlassakis, who pleaded guilty to four of the 11 murders between 1992 and 1999.
Victims' Rights Commissioner Sarah Quick said the victims' families were "incredibly relieved" by the decision.
"Nothing can undo the harm that these victims have suffered, but there is a level of reassurance in knowing that decisions can be thoroughly scrutinised and overturned where appropriate, and that has really helped in increasing the victim's sense of confidence in the justice system," she said.
Parole Board review commissioner Michael David KC's decision on the review said there was "much to be said" for the behaviour of Vlassakis while in custody.
"However ... I am mindful of the legislative mandate, that is, the protection of the public that is of paramount concern," the retired judge wrote in his decision.
"These offences were very evilly premeditated by everyone, they were violent, gross and committed over a substantial period of time.
"There were certain aspects of these crimes that could be described as disgustingly unusual."
He found the Parole Board "underestimated the effect of the gravity of the criminal behaviour of Mr Vlassakis".
"I find that because of the gravity of the offending as described above, with the fact that this is the first occasion on which parole is available, to release Mr Vlassakis at this relatively early stage would be a risk to the community," Mr David wrote.
Counsel for the Attorney-General had submitted that "cogent reasons" for overturning the decision included the chance of reoffending, Vlassakis' drug-use record while in custody being "underestimated" and the gravity of the offending.
Mr David noted Vlassakis had returned three positive drug results between 2001 and 2025, twice for methadone and once for methamphetamines, and there were "further occasions when he has transgressed as far as drugs are concerned".
The review was held on December 5, but was closed to media. Parole applications can be submitted yearly and Mr Maher said it would be open to the parole board to consider any future applications by Vlassakis.
The criminal justice system "needs to have the victim's concerns at the very forefront of what we do, and this (outcome) shows that there are checks and balances in our system", he said.
In his challenge lodged in October, Mr Maher had said the board had failed to give proper weight to the safety of the community.
Vlassakis was 18 when he became involved in the killings in 1998 and was sentenced to life with a minimum term of 26 years, which expired in August.
Parole Board chief Frances Nelson previously said Vlassakis did not represent a risk to the community and would be sent to the Adelaide pre-release centre for up to 12 months to undergo a resocialisation process.
Vlassakis was a key prosecution witness against John Bunting and Robert Wagner, who were found guilty of 11 and 10 murders respectively.
The bodies of eight of their victims were found dismembered in barrels inside a disused bank vault in Snowtown, north of Adelaide, in 1999.
Accomplice Mark Ray Haydon, 66, was released on parole in May 2024 to live in the community under strict supervision.
