"The work that has been done by my office thus far shows a substantive case for an official investigation under the Environment Act.
"Over the next few months my staff and I will conduct this investigation and produce a report to Parliament.
"I realise this is a hugely contentious issue and I would hope to have a report tabled in the House before the end of this year."
Energy and Resources Minister Phil Heatley welcomed the announcement.
"I look forward to the results of this inquiry. It will enable us to move forward with confidence and a clear understanding of what's fact and what's fiction," Mr Heatley said.
"This inquiry will enable us to consider all our options around fracking, from the consenting process through to work in the field.
"And the inquiry is timely - it aligns well with other current major developments in the sector, such as the review of the Crown Minerals Act and the block offers exploration process now under way."
Green Party MP Gareth Hughes called for a halt to fracking in Taranaki while Dr Wright carried out her inquiry.
"Until she can assure the public that it is safe, Government should implement a nationwide fracking moratorium."
Mr Hughes said fracking has been linked to drinking water contamination, health problems and earthquakes.
Seven of the 10 countries to introduce the practice had since enacted regional or nationwide moratoriums, he said.
