The Government's review of extradition arrangements will consider whether the treaty between the United States and the UK is "unbalanced", Home Secretary Theresa May said today.
It will also look at the breadth of the Home Secretary's discretion to intervene in cases, she said.
The review follows widespread concern that the system is biased against Britain and comes after a series of high-profile cases, including that of Gary McKinnon, the alleged hacker wanted by US authorities.
Mrs May said: "I am fully aware there are a number of areas of the UK's extradition arrangements which have attracted controversy in recent years.
"This Government is committed to reviewing those arrangements to ensure they work both efficiently and in the interests of justice."
In a written ministerial statement, Mrs May said the review will focus on five issues.
These include the "breadth of Secretary of State discretion in an extradition case", "whether the US-UK Extradition Treaty is unbalanced" and "whether requesting states should be required to provide prima facie evidence".
It will also look at "whether the forum bar to extradition should be commenced" and the operation of the European Arrest Warrant, including the way in which its optional safeguards have been transposed into UK law.
The Government will appoint "a small panel of experts" to conduct the review, who are expected to report their findings by the end of next summer, Mrs May said.
Last week former home secretary David Blunkett, who signed the Extradition Act, admitted that he may have "given too much away" to the Americans.
Mrs May told MPs: "I reflect on the importance of the relationship between the UK and the USA, but I am also aware of the comments being made outside this House and inside this chamber... That is why I think it is entirely right for the coalition Government to agree that we will review that treaty."
Tory MP David Davis called the review "excellent news", saying it should include a review of the "balance of effect and provision of justice in the Gary McKinnon case".
Authorities in the US want the 43-year-old, who suffers from Asperger's syndrome, to stand trial for hacking into secret military computers.
Mr McKinnon, from Wood Green, north London, says he was looking for evidence of UFOs.
Mr Davis said that, and a number of other cases, "show how ill thought-out some aspects of these agreements are".
Earlier this week, Mrs May was urged to address the concerns over the extradition treaty between Britain and the US.
Tory Tony Baldry said concerns over the workings of the Extradition Act were not helping to reinforce the "mutual trust" between the two countries.
At Commons question time he called on Mrs May to bring forward "amending legislation" if her review into the Act found the provisions were "lopsided".
Shami Chakrabarti, director of civil rights group Liberty, said: "Britain's rotten extradition system is in urgent need of overhaul and we welcome this much-needed review.
"No-one should be parcelled off to a foreign land without due process or when they could be dealt with here at home - people in the UK have been vulnerable to accusation and transportation across the globe for far too long."
Stephen Booth, of Open Europe, a think-tank calling for reform of the EU, said: "The Government urgently needs to correct the mistakes of its predecessor.
"The European Arrest Warrant needs to be comprehensively renegotiated or, at the very least, much stronger safeguards need to be put in place to ensure that British citizens can count on their elected Government to review their case before shipping them off to foreign prisons," he said.
One of the areas that will fall under review is the forum bar to extradition, Mrs May said.
Under current laws, a UK court cannot bar extradition even where the conduct that led to the alleged crime took place while the person was in the UK, as in Mr McKinnon's case.
Amendments made to the Act in 2006 would allow a court to bar extradition on this basis, but the provisions have never been brought into force.
The review will consider whether to give UK judges the power to decide on the basis of each individual case whether it is appropriate to order extradition.
Fair Trials International said that, by focusing mainly on the US with only a limited reference to Europe, the Government's review "might not get to the heart of the problem".
Jago Russell, chief executive of Fair Trials International, said: "Every day, three people are extradited under Europe's no-questions-asked extradition system and the cases of injustice are mounting.
"This review, though welcome, will only produce a fairer system of extradition if it gets to grips with the problems caused by the European Arrest Warrant and if vital new safeguards are put in place."
The UK "must go much further than just looking at how it has implemented 'optional safeguards' contained in the European legislation", the campaign group said.
"These safeguards are not sufficient to prevent the injustice and waste of resources that have characterised the system so far."
Gerard Batten, of the UK Independence Party, said the Government's focus "just highlights their impotence".
Figures released under the Freedom of Information Act showed that 1,032 people were extradited on the orders of European prosecutors in the 12 months to April, he said.
"It is easy for civil liberties campaigners to criticise the US, but the far greater problem lies closer to home with the European Arrest Warrant (EAW).
"British courts have been stripped of their right to protect British citizens from unjust arrest and imprisonment when extradited by foreign courts.
"Extradition is now a mere bureaucratic formality and has been reduced to the export of the carcasses of accused persons. The courts have no power to prevent extradition even when it is glaringly obvious that a gross injustice is being done.
"An honest review can only result in the repeal of the EAW and the provision of a new bilateral international extradition treaty that allows British courts to base their decision on the prima facie evidence, and with power to refuse extradition."
Former home secretary Mr Blunkett said the review appeared to "kick these issues into the long grass" as it will not report until the end of next summer.
"Sensible discussions with our partners could resolve any irritants quite speedily, including a de minimis bar to extradition for offences which would not constitute cause for a prison sentence here in the UK," he said.
"Extradition is as crucial to us as it is to other free countries with functioning judicial systems. That includes those subject to the Council of Europe and Strasbourg court procedures, as well as the democracies of North America.
"The idea that terrorism suspects can avoid extradition for years at a time is totally unacceptable - but the protection of the rights of those accused of either minor misdemeanours or unsubstantiated allegations clearly should be secured and, if improvements can be made, so much the better."
He said extradition arrangements were "collective agreements and not the arbitrary, unitary decisions of a single state - unless we are to go back to a situation where terrorists and criminals can seek sanctuary, as they so often did, in parts of the world which provide protection for them from being held to account for the most appalling abuse of human rights".
Mr Blunkett went on: "I have never been against reviewing the operation of either the EAW or the agreement we reached with the United States seven years ago.
"I am only interested in ensuring that we correctly balance the rights of individuals with the effective operation of justice - and the ability of democratic countries to bring to book those who have committed crimes.
"The review announced today by Theresa May appears to kick these issues into the long grass, with the news that it will not report until the summer of 2011."