The inquiry has been ordered into alleged irregularities in purchases made over a four-year period, starting 2007, from the UK-based firm.
The order for an inquiry comes two weeks after arms dealer Sudhir Choudhrie and his son were arrested by the Serious Fraud Office (SFO) in the UK, which is probing serious bribery allegations in the sale of Rolls Royce engines in Asia.
Sources in the Defence Ministry said that the CBI probe was ordered after complaints alleged discrepancies in the contract for engines, and charged officials in HAL and the Defence Ministry with taking bribes.
The engines were procured for the Hawk Advanced Jet Trainer (AJT) that is being produced by HAL for the Air Force and Navy.
Rolls Royce has not yet commented on the Indian inquiry.
Sources said the allegations were probed by the chief vigilance officer of HAL, and a preliminary report shared with the Defence Ministry. With the report indicating that the charges were serious and had some basis, the ministry decided to order a CBI inquiry.
Choudhrie had been briefly arrested by the SFO in London and questioned on his association with Rolls Royce. The firm is under investigation for several deals, including sales in China and Indonesia.
While it is still not clear if the Indian investigation is linked to the SFO probe, the CBI has already sought information about Choudhries arrest from their counterparts in the UK. The Enforcement Directorate, which is investigating the arms dealers money transactions, has also roped in the Customs Overseas Intelligence Network.