The Supreme Court's five-member bench was split in the decision, with two judges voting against the prime minister, while the remaining three voted to order new investigations.
The court in Islamabad launched a probe previous year into Sharif's family's offshore wealth after his children were linked to accounts in the so-called Panama Papers leaks in 2015.
The collection of leaked Panama papers showed that the offshore companies owned by Shariff's children managed huge funds.
"The prime minister's name was not in the ICIJ Panama Papers, his children's were, and there's no connection between the children's finances and his, because they file separate taxes", said parliamentarian Danyal Aziz, a member of the ruling Pakistan Muslim League Nawaz (PML-N).
The case was based on several identical petitions by Pakistan Tehreek-i-Insaf chief Imran Khan and others about alleged illegal assets of Sharif's family in London. Sharif and his family have denied wrongdoing.
The JIT will present its report before the bench after every two weeks and complete the probe in 60 days.
Prime minister Sharif's government was sacked by then president Ghulam Ishaq Khan for alleged corruption in April, 1993.
Shah maintained the three other judges had not disagreed with those dissenting, but added the condition of a JIT to probe the PM and his sons.
Government supporters celebrated the decision with candies outside the court in Islamabad, where around 1,500 police commandos and riot forces had been deployed ahead of the highly anticipated decision.
The corruption allegations against Sharif were set off following the release of the Panama Papers.
They said the ruling cleared the way for Sharif to win a fourth term in office in a general election scheduled for early 2018. "Whatever the verdict, am amazed and humbled to see the overwhelming support for Nawaz Sharif", she tweeted on Thursday.
The body will be constituted within seven days, and submit fortnightly reports to the Supreme Court, the verdict said.
Khan's party has indicated that it would not launch new street protests if it was disappointed by the judgement.
Information Minister Maryam Aurangzeb said the decision marks "the defeat for all those who have been levelling baseless allegations against Nawaz Sharif".
Speaking to media after a chaotic session of the National Assembly, Khan reiterated his demand that the Prime Minister step down, following the apex court's ruling that further investigation was needed into corruption allegations levelled by the opposition at the PM and his family.
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