Jo Haylen said urgent briefings she received in the days since being sworn in had laid bare the dire state of NSW's heavy rail system.
"What I have learned alarms me," she told reporters on Friday.
"There are serious problems when it comes to our train network."
Sydney rail commuters have endured a year of delays, disruptions and widespread outages including a digital radio system failure on March 8 that left every train stationary for 90 minutes at the start of the afternoon peak.
Ms Haylen promised to get to the root cause of the city's heavy rail issues as the worst on-time running since the pandemic puts Sydney's global city status at risk.
She said National Transport Commission chairwoman Carolyn Walsh would oversee an external audit of Sydney Trains - despite the service's advice an internal review would suffice.
Ms Haylen said the investigation would not be a "witch hunt" and would look to work collaboratively with Sydney Trains management, who are in the firing line after Labor campaigned on slashing senior executive roles in the public sector by 15 per cent.
Ms Walsh will investigate the causes of repeated infrastructure issues and attempt to find "rapid and durable solutions" and reforms to reduce problems in the future.
The terms of reference will be worked out in the coming days but will look at both rail infrastructure and systems, the government said.
The review will report interim findings within six weeks, with the full investigation to be handed down in October.
Ms Walsh said her first focus would be any immediate safety issues affecting the system, with an eye to implementing solutions straightaway.
While there was no indication of any safety risks in the system, Ms Walsh said there was a strong relationship between reliability and safety.
March was a particularly poor month for the city's rail network.
Two days after the radio system crashed, a live overhead wire landed on a train in Panania, trapping 500 people on board for 90 minutes, halting traffic on the T8 Airport line and causing delays across the broader network.
Multiple signal outages in the Strathfield area as Sydneysiders were heading to the polls for last Saturday's election caused delays across the network.
The review comes as the new Minns Labor government tries to divert any anger over a scheduled toll increase on Saturday towards the former government and its "addiction to privatisation".
Transurban is raising tolls on five Sydney tollways, including the Eastern Distributor and the Cross City Tunnel, by about 1.8 per cent - an abnormally high hike due to elevated CPI.
"Every time the tolls go up, it's a reminder of the former government's obsession with privatisation," Premier Chris Minns said on Friday.
The new government is promising structural toll reform and a weekly cap starting at $60 in 2024.
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