Prime Minister David Cameron has appointed Lord Young as his adviser on health and safety issues and to lead the review, which will report back to Downing Street by the summer.
Cameron said the move was taken to curb an over-cautious approach by businesses, public sector organisations and charities in areas such as play.
Cameron said: "The rise of the compensation culture over the past 10 years is a real concern, as is the way health and safety rules are sometimes applied.
"We need a sensible new approach that makes clear these laws are intended to protect people, not overwhelm businesses with red tape."
One of the most high-profile issues over the past 10 years has been schools banning conkers from the school playground for health and safety reasons. One school in Cumbria in 2004 even brought in safety goggles for pupils to wear when playing the game.
The review will look across the private and public sectors, and Lord Young will liaise with a number of government departments for the review.
Lord Young said: "I hope my review will reintroduce an element of common sense and focus the regulation where it is most needed. We need a system that is proportionate and not bureaucratic."
The review has been welcomed by Play England's national practice manager Mick Conway. He said: "Play England would support a proportionate approach to health and safety, which balances the benefits against the potential risks."
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