The Competition and Markets Authority (CMA) says it will investigate how 21st Century Fox's proposed takeover of Sky would affect media plurality and broadcasting standards in the UK.
Culture Secretary Karen Bradley sent the £11.7bn ($15.4bn) deal to the CMA for review last month following the conclusion of a three-month inquiry by Ofcom.
Rupert Murdoch's Fox already owns 39% of satellite broadcaster Sky and is seeking to buy out the rest.
The CMA said it would explore the extent to which the Murdoch family would be able to "control or influence editorial and commercial decisions" at Sky News if the takeover went through.
It would also investigate the ability of the Murdochs to "influence the political agenda" if they assume complete control of Sky, and whether the merged entity would have "a genuine commitment to broadcasting standards".
The CMA is required to report to Bradley with its recommendations within six months of opening the investigation, after which the culture secretary will decide on whether or not the takeover can proceed.
A report released by Ofcom in June warned that the Murdoch family, which is behind the Sun, the Times and the Sunday Times newspapers, would have "increased influence" over British media should the Fox-Sky deal go through.
A previous attempt by Fox to buy Sky was abandoned in the midst of the phone-hacking scandal in 2011.
"The CMA will use its extensive experience of investigating different issues in a wide range of sectors to thoroughly and impartially investigate the proposed takeover of Sky Plc by 21st Century Fox," said Anne Lambert, panel chair at the CMA.
"Once the investigation is complete we will report back to Karen Bradley for her to make a final decision."
Both Sky and Fox expressed disappointment last month at the government's decision to have the deal investigated by the CMA.