The DHSC said the increased pressure on the NHS meant that "for too long, people with acute needs have faced long waits, had to navigate overstretched services, experienced inequalities in care and felt abandoned when support was needed most".
The review will look at how NHS services are working and what support people could be given earlier.
Government sources said they wanted to establish a baseline for diagnosis and what good quality care looked like.
It is thought one of the factors in long waits was that people who did not necessarily need treatment were ending up being referred on to waiting lists when practical support, such as help with social or financial issues or a short burst of talking therapy, could provide the solution.
Investment is already being made in increasing support in schools and expanding talking therapy services.
London GP Prof Sir Sam Everington, who is president of the Royal College of GPs, said his workload with mental health patients has "sharply increased" in the last few years
"There's a lot of pressure from social media for people to have a diagnosis.
"So you give everyone a medical badge of anxiety or depression or medical diagnosis, when a lot of this is just the ups and downs of everyday life.
"I think the message we give all the time is, actually, we've got the answer to somebody's problem and there's a pill, there's a silver bullet that actually is going to resolve all this. Well, it's not".
Mental health charity Mind welcomed the government's announcement and signalled their willingness to contribute to the review.
"This is a huge opportunity to really understand what is driving increasing levels of mental illness, especially among our young people," chief executive Dr Sarah Hughes said.
The National Autistic Society said: "We need urgent action because, while we are currently seeing the number of people seeking an assessment levelling out, the average waiting time is rocketing."