The government wants the UK to become a world leader in driverless technology.
It will publish a code of practice in the spring which will allow the testing of autonomous cars to go ahead.
Self-drive pods that will be tested in Milton Keynes and Coventry are unveiled for the first time.
The government promised a full review of current legislation by the summer of 2017.
That review will consider whether a higher standard of driving should be demanded of automated vehicles.Gateway will test self-drive passenger shuttle vehicles in Greenwich
It will also look at who would be responsible in the event of a collision and how to ensure the safety of drivers and pedestrians.
The Department of Transport report acknowledged that true driverless cars may be some way off and that current tests of the technology will need to include a qualified test driver to supervise the vehicle.
"Driverless vehicle technology has the potential to be a real game-change on the UK's roads, altering the face of motoring in the most fundamental of ways and delivering major benefits for road safety, social inclusion, emissions and congestion," said transport minister Claire Perry.
The government is providing ?19m to launch four driverless car schemes in four UK locations.
To mark the launch of the review, Ms Perry and Business Secretary Vince Cable highlighted some of the trials that they are funding, including a fully autonomous shuttle in Greenwich and a BAE System-developed Wildcat vehicle, which will be tested in Bristol.
Self-drive pods that will be tested in Milton Keynes and Coventry were also unveiled for the first time.
Prof Stephen Glaister, director of the RAC Foundation, said: "These trials are not just about harnessing technology to make our travelling lives easier and safer, they also involve getting the regulation right.
"Alongside the hi-tech innovation you need policy decisions on long-term, low-tech matters such as who takes responsibility if things go wrong. As and when these vehicles become commonplace, there is likely to be a shift from personal to product liability and that is a whole new ball game for insurers and manufacturers."
But the Institute of the Motor Industry (IMI) said that it was concerned that, while the government is pushing ahead with making driverless cars a reality, the service and repair sector did not yet have the skills and infrastructure in place to deal with the new technology.
IMI chief executive Steve Nash is calling on businesses to take steps to address this sooner rather than later.
"We believe the government is yet to fully [realise] the pressures we are under," he said.Driverless cars around the world Google is the most high-profile company to run self-drive car trials to date The US was the first country to introduce legislation to permit testing of automated vehicles. Four US states have done so but 15 have rejected bills related to automated driving In Europe, only Germany and Sweden have reviewed their legislation in this area Those wishing to conduct tests in the UK will not be limited to test tracks or certain geographical areas and will not need to obtain certificates or permits Smartphone app
The Lutz Pathfinder pod which will be tested on the pavements of Milton Keynes later this year is a two-seater, electric-powered vehicle that is packed with 19 sensors, cameras, radar and Lidar - a remote sensing technology that measures distance by illuminating a target with a laser and analysing the reflected light.
In a panel behind the seat is the computing power equivalent to two high-end gaming computers.
Three pods will drive themselves on the pavements and pedestrianised areas of the city initially and, if successful, a fleet of 40 vehicles will be rolled out. These vehicles will be able to talk to each other as well as being connected to a smartphone app to allow people to hail them.
Alongside the trials in Milton Keynes and Coventry, Bristol will host the Venturer consortium, which aims to investigate whether driverless cars can reduce congestion and make roads safer.
Its members include the insurance group Axa, and much of its focus will be on the public's reaction to the technology as well as the legal and insurance implications of its introduction.
Greenwich is set to run the Gateway scheme. This will be led by the Transport Research Laboratory consultancy and also involves General Motors, as well as the AA and RAC motoring associations. It plans to carry out tests of automated passenger shuttle vehicles as well as autonomous valet parking for adapted cars.
In addition, a self-drive car simulator will make use of a photorealistic 3D model of the area to study how people react to sharing the driving of a vehicle with a computer.
Research undertaken by Virgin last year suggested that 43% of the British public wouldn't feel comfortable with the presence of driverless cars on the roads.
A quarter of those surveyed said that they would not get inside such a car.
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