The director of public prosecutions, Keir Starmer QC, that the right to be offensive 'has to be protected'.
News of the review follows two high-profile prosecutions, this first of which saw Matthew Wood jailed for 12 weeks on Monday for posting comments about missing five year old April Jones.
This was shortly followed by twenty year old Azhar Ahment who was issued 240 hours of community service for writing an offensive post about dead British soldiers.
The Crown Prosecution Service (CPS) will head up the review and new guidelines are expected to be announced before Christmas.Starmer told the BBC that prosecutors were finding it difficult to effectively work within existing laws.
He said: "The emerging thinking is that it might be sensible to divide and separate cases where there's a campaign of harassment, [or] cases where there's a credible and general threat, and prosecute those sorts of cases.
"And put in another category, communications which are, as it were, merely offensive or grossly offensive."
He added: "[It] doesn't mean the second category are ring-fenced from prosecution, but it does I think enable us to think of that group in a slightly different way."
Social media sites may also be urged to improve moderation techniques to ensure that content that is deemed offensive is swiftly removed.
A freedom of information request has revealed that there were 2,347 investigations into offensive comments on social media sites in 2010. This then increased to 2,490 in 2011.