The initiative from transport minister Rosie winterton is intended to ensure that traffic signs keep pace with the latest technology, help to cut congestion and emissions and keep traffic moving efficiently.
The review's aims include:
New powers to reduce street clutter - and ensure out of date signs are removed;
New traffic sign technologies to manage traffic flow;
Better road information - such as up-to-date travel news - to give motorists informed choices about their journeys;
Showing how effective signing can provide safer roads and reduce accidents;
Improving road users' understanding of traffic signs and signals.
It is said to be the most significant traffic sign policy review in Britain since the 1968 Vienna Convention on Road Signs and Signals.
Ms Winterton said: "Road conditions have changed dramatically over the years - and road signs need to keep pace with that change to provide the best information possible to all road users.
"It is vital we help motorists, cyclists and pedestrians understand how to use our roads - improving road safety and helping reduce congestion and CO2 - without cluttering our streets with unnecessary signs."
Road users, highway authorities and organisations interested in streetscape will play a key role in the steering group leading the review.
The first meeting of the traffic signs policy review steering group is expected to take place next month. The steering group is expected to deliver an action plan, for the review itself, by the middle of next year.
DfT will then work directly with specialist working groups to develop policy proposals for consultation.