The investigation will look into the connection between video gaming and gambling, with the DCMS presenting its findings and advice to the government on how to create policy that protects the public.
Damian Collins, Chair of the DCMS Committee, said: "During our recent inquiries, the committee has heard repeated concerns about the impact to society of the increasing amounts of time people spend immersed in online worlds, and the potentially addictive nature of social media and gaming.
"We want to explore these concerns during this inquiry and consider what the right response should be in setting public policy for the future."
Key questions the DCMS will seek to answer include: What are the effects of in-game spending, especially on children, and does it need stronger monitoring or regulation? What challenges and opportunities do gaming and esports offer the gambling industry and how should these be managed?
Games such as FIFA and Call of Duty have been criticised for their use of pseudo-gambling. In FIFA, gamers can spend money on player packs, with limited of knowledge of the value of the footballers included. The protection of personal information will also be examined in the inquiry.
Collins said: "The Committee will also consider how individuals’ online data is used by immersive technologies and what security is offered. The government has recently pledged to make the UK ‘the safest place to be online and the best place to start and grow a digital business’."
The public, organisations and others with relevant expertise have been invited by the DCMS to submit evidence on the subject by Monday 14 January 2019.