Young will undertake a Whitehall-wide review of the operation of health and safety laws and the growth of the compensation culture.
He is expected to report to the prime minister in the summer and will investigate concerns over the application and perception of health and safety legislation, together with the rise of the compensation culture over the last decade.
Young will work with the appropriate government departments to bring his proposals into effect. He will continue to report regularly to the prime minister on progress.
Cameron said: "I'm very pleased that Lord Young has agreed to lead this important review. The rise of the compensation culture over the past 10 years is a real concern, as is the way health and safety rules are sometimes applied.
"We need a sensible new approach that makes clear these laws are intended to protect people, not overwhelm businesses with red tape. I look forward to receiving Lord Young's recommendations on how we can best achieve that."
Young added: "Health and safety regulation is essential in many industries but may well have been applied too generally and have become an unnecessary burden on firms, but also community organisations and public services.
"I hope my review will reintroduce an element of common sense and focus the regulation where it is most needed. We need a system that is proportionate and not bureaucratic."