The suit argues that the semi-automatic rifle used in the school shooting is a military weapon and should not have been sold to civilians.
In December 2012, Adam Lanza killed 26 people with a Bushmaster XM15-E2S.
Remington Arms, the parent company of Bushmaster Firearms, sought to have the lawsuit dismissed.
The company argued that federal law protects gun manufactures from most lawsuits over the criminal use of their products.
Joshua Koskoff, a lawyer for the families, said an exception to the law applies to the case. Litigation is permitted if the company know or should know their products are likely to be used in a way that risks injury to others, he said.
However, Superior Court Judge Barbara Bellis did not rule on that point, saying the debate on the federal shield law should be argued later in the legal process.
"We are thrilled that the gun companies' motion to dismiss was denied," Mr Koskoff told the Associated Press. "The families look forward to continuing their fight in court."
The families of the Sandy Hook shooting victims have won a small legal victory after a judge ruled their lawsuit against a gun maker could continue.