It is understood to be working with retailers, manufacturers and processors to define a set of guidelines and principles to improve the labelling of dairy and meat products.
The guidelines will be voluntary, but Defra has not ruled out mandatory obligations if self-regulation does not improve labelling practices. It is expected the new guidelines will be published before the end of the year.
Defra's move comes as European politicians and regulators are overhauling food labelling laws at EU level, including country-of-origin labelling.
Industry observers said it was not yet clear precisely what direction Defra would take with its proposals, and to what extent these would complement or clash with EU plans.
Defra confirmed it was currently meeting with key stakeholders but would not comment further.
NFU chief science and regulatory affairs adviser Helen Ferrier said the work that had been carried out by the pig industry on country-of-origin labelling could be indicative of the principles Defra might want to see. Earlier this year, Bpex announced a new system for labelling pork products, which spells out on the packaging if the meat was reared and slaughtered in one place but processed in another.
It is expected that Defra will want the rules to apply to both primary and some simple processed products such as a piece of meat with seasoning. It is unlikely manufacturers would have to label every ingredient on complex processed products such as pizzas.
Better country-of-origin labelling was one of the Tory election promises, and agriculture minister Jim Paice has called on the industry to embrace more transparent labelling on a number of occasions.
By opting to do something about labelling now, the UK government will precede any rules coming in from Europe by two or three years.