Top doctors receive payouts of up to 76,000 a year for performing above the usual standard expected of their NHS role.
The Clinical Excellence and Distinction Awards were introduced in 1948 and are paid in addition to consultant salaries.
In the last year, the NHS paid more than 200m for the awards but the Government wants to bring the scheme "up-to-date" and in line with other public sector pay schemes.
Health Secretary Andrew Lansley said: "This review will ensure that Clinical Excellence and Distinction Awards are in line with other public sector pay and incentive schemes."
The awards are given for a range of achievements, including research and commitment to quality of care and leadership.
Dr Mark Porter, chairman of the British Medical Association's consultants committee, said it was worth noting that clinical excellence award schemes had been reviewed more than once in recent years always with the conclusion that they were beneficial to the NHS.
The review, commissioned by all four UK Health Departments, will be led by the Review Body on Doctors' and Dentists' Remuneration.