The government is to review key counter-terrorism and security powers including the 28-day limit on detaining terrorist suspects without charge.
Home Secretary Theresa May said control orders, stop and search powers, and methods to deal with bodies promoting hatred and violence would be examined.
She said the review would "put right the failures" of the last government and "restore ancient civil liberties".
Labour said the review, announced by Mrs May in the Commons, was unbalanced.
The review will cover six key areas, encompassing what the home secretary said were the most "controversial and sensitive powers" available to government to deal with terrorist threats.
They are: the use of control orders for terrorist suspects, stop and search powers - including in relation to photography - pre-charge detention, the deportations of foreign nationals from the UK who pose a threat to national security, measures to deal with organisations that promote hatred or violence and the use of surveillance powers by councils and wider access by government and public bodies to phone and e-mail data.
Mrs May said the review - which the government committed to undertake in its coalition agreement - was necessary because of concerns that existing powers had either been "misused" or had "encroached" on civil liberties.
She said civil liberties organisations would be asked to contribute to the review and there would be independent oversight of the process by the former director of public prosecutions Lord Macdonald, who is now a Liberal Democrat peer, to make sure it was "conducted properly" and all relevant options considered.
The review must ensure existing powers were "appropriate" to the level of terrorist threat and strike a balance between protecting the public and upholding individual freedom, she added.
"This review will enable this government to put right the failures of the last government," she said.
"In doing so, it will restore the ancient civil liberties that should be synonymous with the name of our country."
Mrs May said the review should be conducted as "quickly as possible" and planned to report back on the findings of the review in the autumn.
Any proposed changes to the law would be subject to review by the government's independent reviewer of terrorism legislation, Lord Carlile, she stressed.
Shadow Home Secretary Alan Johnson said the government had made "immature and partisan" attacks on Labour's record and called for a cross-party consensus on reviewing existing laws.
He said the threat to the UK had not "diminished" since the attacks on London in July 2005, which led to the passage of extensive counter-terrorist legislation.
"In what way does she consider the previous government to have ridden roughshod over civil liberties under control orders, on deportation with assurances, on dealing with organisations that promote hatred or violence or on detention of terrorist suspects before charge," he said.
"The balance between collective security and individual freedom has to be carefully struck under the ever-changing and constantly evolving threat of international terrorism.
"But this review seems to be about one side of this balance."
Former Home Secretary David Blunkett said the involvement of civil liberties groups and a Lib Dem peer in the review suggested its outcome was "already pre-determined".
He added: "The idea that we should not hold suspected terrorists pre-charge for anything more than the seven days which existed before September 2001 is a demonstration of the dangerous naivety which can only provide succour to those who would use democracy in order to destroy it."
But the review was welcomed by Plaid Cymru, which saying it hoped it would lead to the repeal of "the most illiberal and authoritarian legislation".
And civil liberties organisation Liberty said it was "delighted" to be able to contribute to the review.
"No-one underestimates the terrorism threat and everyone wants to see a country united, safe and free," said its director Shami Chakrabarti.
"Liberty welcomes this once-in-a-generation opportunity to reform counter-terror measures and bring them within the rule of the law."