The project, with funding of up to £100,000, will document how much the country uses, how much is sustainably sourced and consider what changes can be made to lessen environmental damage.
Environment secretary Caroline Spelman announced the plans last week at the First Global Business of Biodiversity (GBOB) Symposium in London, a gathering of world business leaders and experts.
She said: "Consumers and industry have the power to save rainforests and wildlife in areas like South East Asia.
"This coalition is striving to be the greenest government ever. That means considering our impact abroad as well as at home."
Palm oil is a cheap product used in food, cosmetics, animal feed, tyres and biodiesel, it features in one in 10 supermarket products.
Demand is set to double from 2000 levels by 2020 due to rising food demand and renewable transport fuel targets.
But the expansion of plantations in South East Asia - Malaysia and Indonesia account for 90% of world supply - is wiping out forests, driving up greenhouse emissions and threatening wildlife such as the orang-utan.
The oil can be grown sustainably without damaging forests and wildlife but presently just four per cent of world supply is certified sustainable.
The research project will examine for the first time how palm oil is used by UK consumers.
At the GBOB, the UK and Dutch governments also convened a business to business leaders' meeting at the symposium to discuss the issue.
Work on the research project is due to begin next month (August) and the Department for Food, Environment and Rural Affairs (DEFRA) has also this month begun a project with the Chinese Chamber of Commerce to develop a business case for sourcing sustainable palm oil.
China is the world's largest country consumer of palm oil. Bids to carry out the research project have been submitted and a decision on the chosen contractor is due this month.