Judge John Sprizzo said giving the men back their jobs with back pay "seems to be the remedy I have to implement as a matter of law."
But he said if the city didn't want to reinstate the men, it should try to settle the case with a cash payout to cop Joseph Locurto and firefighters Robert Steiner and Jonathan Walters.
Giuliani terminated the trio, who live in Broad Channel, Queens, after they rode on a 1998 Labor Day parade float that attempted to make a sick joke of a black man's horrific dragging death in Texas.
After the hearing, city lawyer Jonathan Pines said it seemed unlikely the city would hand back the men's jobs.
Giuliani has maintained he made the correct decision to terminate the men, and the city has said it intends to appeal.
Steiner's lawyer, Marvyn Kornberg, said after the ruling was handed down last week that Giuliani should be held liable for punitive damages.
But Sprizzo poured cold water on the prospect yesterday, saying "punitives are the exception, not the rule."
He said it could also be intrusive to subject Giuliani to having his personal assets analyzed by the trio's lawyers.
Walters and Steiner, who were in court yesterday, declined to comment.
They left through a side door after the hearing was adjourned until Sept. 10.
