The review, to be conducted by chief medical officer Dame Sally Davies, will cover cyberbullying, online gaming where there is a social media aspect, sleep problems, and problematic internet use, also known as "internet addiction".
Davies will draw up guidance to help parents ensure children don't use social media in a way that harms their mental health, which will include what age a child should be allowed to sign up to a social media account, and how often they should have access. Interim findings from the review will be punished in December.
Hancock said the threat of social media on mental health is "similar to that of sugar on physical health".
"Overwhelmingly technology is a force for good, but we are seeing more and more evidence that children using social media sites for hours on end each day is having a detrimental impact on their mental health," Hancock said.
"I want to empower parents to keep their children safe in the digital age which is why I've asked the chief medical officer to draw up helpful guidance to allow them to make an informed choice."
Davies said mental health is "just as important as physical health and should be treated as such".
"I recognise there is concern amongst parents about the impact of social media on their children's mental health so I am conducting a thorough evidence review and will draw up advice to help empower parents and provide clarity," she added.
Next year, the Department of Health and Social Care will work with the Department for Digital, Culture, Media and Sport to launch an online awareness campaign to raise awareness of all existing information and tools for parents on limiting their children's screen time.
Evidence shows that children who spend more than three hours using social networking websites on a school day are twice as likely to report high or very high scores for mental ill-health.