The review will investigate whether common human emotions have become "over-pathologised" amidst a significant increase in welfare spending.
This initiative addresses a rise to 4.4 million working-age people claiming sickness or incapacity benefit, an increase of 1.2 million since 2019, with a notable surge among 16-34 year olds due to mental health issues.
Professor Peter Fonagy, a clinical psychologist, will lead the review with Sir Simon Wessely as vice chairman, examining evidence from research, lived experience, and clinicians.
Mr Streeting stressed the importance of a "strictly clinical lens" to understand rising diagnoses and ensure timely access to accurate support.