The legality of the drug mephedrone will be examined "very speedily, very carefully" following the deaths of two teenagers, Lord Mandelson has said.
The business secretary said the government would take "any action" needed to deal with the drug.
Louis Wainwright, 18, and Nicholas Smith, 19, died in Scunthorpe on Monday after taking the drug.
Four people have been arrested in connection with the deaths, including two men aged 26 and 20 and a boy of 17.
The Home Office said it would receive advice from the Advisory Council on the Misuse of Drugs (ACMD) on 29 March.
The ACMD said its chairman, Professor Les Iverson, had discussed mephedrone with Home Secretary Alan Johnson, who had expressed "grave concern".
It said: "The council has been looking at the dangers of mephedrone, and the related cathinone compounds, as a priority."
According to BBC home affairs correspondent Danny Shaw, a member of the ACMD, speaking anonymously, said he would be "very surprised" if the council did not make its decision at its next meeting in March.
The council will then report its recommendations to the home secretary.
The ACMD member said there was also "some understanding" of the science behind mephedrone, though it was "far from perfect".
Lord Mandelson said the government would take "any action that is justified to deal with this and to avert such tragic consequences occurring in the future".
He also admitted that he had never previously heard of the drug.
Shadow home secretary Chris Grayling said there was a strong case for banning mephedrone and other "legal highs".
He said: "There is mounting evidence to suggest these drugs are doing real damage to people's health.
"An incoming Conservative government would mount an urgent review of these substances with a view to adding them to the list of banned substances."
The parents of Mr Smith are also calling for a ban.
His mother, Elaine, said action was needed to stop children having access to mephedrone, saying: "If that means making it an illegal substance, then that's how it should be."
His father, Tony, said the legal status of the drug could have given his son a "false sense of security", saying the government should have acted sooner to make it illegal.
Mephedrone is known by various names, including "M-Cat", "MC", "mieow", "meow", "4MMC" or simply plant fertiliser.
It is usually a white or yellowish powder, which is snorted, but can also be obtained in pills and capsules. It is marketed as plant food.
The National Association of Head Teachers (NAHT) also says a ban should be considered.
NAHT general secretary Mick Brookes told the BBC mephedrone use had become more widespread.
He said: "This drug clearly has the same inherent dangers as any Class A drug and I think serious consideration should be given to banning it.
"The problem with that is that you then criminalise the people who take it, so we need to think very carefully about what we do, but act with some speed."
Some head teachers say the drug should be made illegal immediately - even if it risks some children getting a criminal record.
Schools have become increasingly worried that because the drug is legal, children as young as 12 are trying it.
An ACMD sub-committee had been looking into legal highs but its work stopped following the dismissal of Professor David Nutt as the chief drugs adviser last October.
Prof Nutt was sacked after publicly disagreeing with the government's decision to reclassify cannabis as a Class B drug and not to downgrade ecstasy.
Five ACMD members then resigned in the row that followed Prof Nutt's departure.
Websites selling the drug have told their customers it is a case of "when" not "if" mephedrone will be banned.
The two teenagers who died were found collapsed at their homes after a night out in Scunthorpe.
Humberside Police said the drug appeared to have contributed to their deaths. They had been out drinking in the hours before they died.
Post-mortem examinations are being carried out.
Mephedrone has become popular on the UK club scene in recent months and is said to have effects similar to the drug ecstasy.
Side effects are said to include psychosis, palpitations, burning throat, nosebleeds and insomnia.
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