The government says it is making dementia a top priority as it calls on experts to find ways to reduce its spiralling burden on society.
Nearly two-thirds of people with dementia live in the community
There are 560,000 people with dementia in England, each costing the economy £25,391 every year.
But an ageing population means this figure is set to double in the next 30 years with predictions of more than a million people with dementia by 2025.
The National Dementia Strategy group has 12 months to find solutions.
Caring for people with dementia costs the NHS and social care services at least £3.3 billion a year.
However, the overall annual economic burden in England is estimated at £14.3 billion.
Care Services Minister Ivan Lewis said: "The scale of our ambition must now meet the scale of the challenge as demographic realities mean dementia will impact on an increasing number of families in our society.
"The current system is failing too many dementia sufferers and their carers.
"I am determined that this disease is brought out of the shadows."
He said there were three key areas - disease awareness, early diagnosis and high quality treatment - where improvements had to be made.
Nearly two-thirds of people with dementia live in the community, cared for by some 476,000 unpaid friends or relatives.
Taxpayers contribute about £3.3 billion towards direct health and social care services for people with dementia.
But £5.2 billion of the informal care costs and 30% of the £5.8 billion of care home costs are borne by families.
There are currently no treatments that can prevent or cure dementia, although there are some therapies that can delay the progression of symptoms.
But in terms of the percentage of suitable patients receiving these anti-dementia drugs, UK performance is in the bottom third in Europe.
And the average reported time to diagnose the disease in the UK is also up to twice as long as in some countries.
Professor Sube Banerjee, professor of mental health and ageing at the Institute of Psychiatry, King's College London, will head the national strategy team. This will include representatives from the voluntary sector, professional bodies and individual experts.
Professor Banerjee said: "Dementia is one of the largest and most important public health and social care challenges that we face.
"We need to act now to develop services."
Neil Hunt, chief executive of one of the strategy members, the Alzheimer's Society, said: "For too long dementia has been at the bottom of the health and social care pile.
"This represents a real step forward in policy towards dementia."
A recent National Audit Office "Value for Money" report said, historically, the Department of Health had given little priority to dementia, partly because of the focus on other major diseases such as cancer and heart disease.
Progress has also been hampered by a lack of good quality data, by stigma, and by the low level of political and national focus on older people's mental health, it said.
A verdict on the first-ever challenge of a decision by the government's drugs watchdog the National Institute for Health and Clinical Excellence (NICE) over the provision of Alzheimer's drugs is due on Friday.
NICE says only people with moderate stages of Alzheimer's should have access to drug treatments.
The Alzheimer's Society, among others, has been challenging this decision in the High Court. It says people with early stage disease should also be eligible for treatment on the NHS.