The suit was stalled last year when a judge ruled it couldn't proceed as a class action because its "broad, sweeping nature" was viewed as problematic.
But a Divisional Court panel hearing an appeal of that ruling has now cleared the way for the suit to move forward.
In a unanimous decision, Justice Ian Nordheimer wrote on behalf of the panel that police actions alleged in the suit, if proven, would have "violated a basic tenet of how police in a free and democratic society are expected to conduct themselves."
More than 1,000 people were detained by police during the G20 summit in June 2010 after protesters using so-called Black Bloc tactics broke away from a peaceful rally and ran through the downtown, smashing windows and burning police cruisers.
The vast majority of those detained were released without charge within 24 hours.