The privacy watchdog said that it has commissioned to carry out a comprehensive assessment of the strengths and weaknesses of European data protection law and to identify promising avenues for reform.
The said that the research comes amid growing fears that the current European directive is no longer fit for purpose.
It believes that the law needs to be modernised to meet the technological and social challenges of the 21st century.
The research will consider how consumers' rights can be enhanced in a "rapidly evolving information society" and will provide EU bodies, national governments and the data protection community with proposals for improving regulatory approaches for protecting privacy and personal information.
Richard Thomas, UK information commissioner, said: "European data protection law is increasingly seen as out of date, bureaucratic and excessively prescriptive.
"It is showing its age and is failing to meet new challenges to privacy, such as the transfer of personal details across international borders and the huge growth in personal information online.
"It is high time the law is reviewed and updated for the modern world. This research will help identify ways we can make the law more straightforward and more effective in practice, but less burdensome for organisations."
The study by Rand Europe will be made publicly available in Spring 2009.