The review, the first since 2012, will be led by retired Air Chief Marshal Sir Angus Houston and former Labor defence minister Stephen Smith, the ABC reported.
They will undertake the most comprehensive reassessment of the military in 35 years in the face of potential "state-on-state conflict", Defence Minister Richard Marles said, according to the ABC.
Their recommendations on the ADF's structure, posture and preparedness are expected to be presented to the government by March 2023 at the latest.
"In 2020, the Defence Strategic Update identified that changes in Australia's strategic environment are accelerating more rapidly than predicted in the 2012 Force Posture Review," Mr Marles said.
"This necessitates an immediate analysis of where and how defence assets and personnel are best positioned to protect Australia and its national interests.
"It also requires an assessment of defence's force structure and Integrated Investment Program."
Prime Minister Anthony Albanese said Mr Smith, a West Australian who was defence minister from 2010 to 2013, and Sir Angus bring a depth of experience to the task.
"Professor Smith and Sir Angus bring a unique blend of knowledge and experience to their role as independent leads," he said, according to the ABC.
Sir Angus joined the air force in 1970 before rising through the ranks to become Chief of Air Force in 2001.
In 2005, he was appointed Chief of the Defence Force, before retiring in 2011.
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