Differences between the terms and conditions of Gurkhas and the rest of the British Army are to be reviewed to see if they are "totally justifiable".
Gurkhas have long campaigned for an end to inequalities
UK Defence Secretary Geoff Hoon said on Tuesday it would be wide-ranging, including pay and pensions and accommodation.
There had been public criticism and "unease" about disparities, he said.
Gurkhas - currently numbering around 3,500 - have fought as part of the British Army for almost 200 years.
They had a long and proud history in the Army, said Mr Hoon, adding that the review showed commitment to ensuring their terms and conditions were "fair and fit for the modern world".
The government wanted to know any differences in terms and conditions were "absolutely justifiable as well as fully understood and accepted by our Gurkha soldiers", he said.
He said: "We want to ensure that the MoD's position, both legally and morally, is beyond reproach."
Members of the regiment have long pushed for rights to British citizenship after their retirement, and better conditions during their service.
Mr Hoon said there had been a succession of changes to the Gurkhas' terms and conditions to reflect changing circumstances - including the fact that they have spent more time in the UK since the withdrawal from Hong Kong in 1997.
An 18-month government review concluded in September that Gurkhas who have served in the British Army would now be allowed to apply to settle in the UK and gain citizenship.
Gurkhas who leave after more than four years' service will be able to apply to stay in the UK, although the rules do not apply to those discharged before July 1997.
Some campaigners complained that would mean 100 Gurkhas in the UK - a quarter of the total number who live here - would not be entitled to stay.
Mr Hoon said the latest review would build on earlier findings, including work to date on the review of Gurkha Married Accompanied Service - the right to married quarters - now due to be completed in the autumn.
Last November a former Gurkha who claimed his pension was so small he was nearly forced to beg, settled a race discrimination case against the Ministry of Defence.
Lal Budha - had served for nearly 24 years in Hong Kong, Brunei, South Korea and the Falklands - accepted a payment of £55,000.
The 44 year old, from High Wycombe, Buckinghamshire, claimed his Army pension was £95 a month, and was a fifth of that a British soldier would get.
The British Army has recruited Gurkhas from hill tribes in Nepal since 1815 after their potential as warriors was first realised at the height of British empire-building.
Following the partition of India in 1947, an agreement between Nepal, India and Britain meant four Gurkha regiments from the Indian army were transferred to the British Army, eventually becoming the Gurkha Brigade.