The Solicitors Regulation Authority has hired an economic consultancy and a leading academic to undertake research in a bid to better understand the 25,000-lawyer strong in-house sector.
The research will be led by consultancy Oxera, supported by Professor John Flood of the University of Westminster. Market research agency Facts International will also take part.
The SRA has tasked the researchers with looking at how in-house teams are made up, what work is carried out - reserved or unreserved, and what motivates solicitors to work in-house rather than in traditional law firms.
The regulator said it was keen to learn more about how in-house lawyers work and the challenges they face.
The results will be used to identify emerging issues and inform SRA policy in future. The project is expected to be completed by spring 2013.
The SRA has already invited a number of local authority lawyers to provide advice as it gears up to review in-house practice rules.
The regulator has asked various chairs of Solicitors in Local Government branches as well as members of the Association of Council Secretaries and Solicitors to take part in a local government in-house lawyers reference group.
Tim Livesley, the SRA's Chief Economist, said: "This research will allow us to gain a more detailed insight into the types of work carried out by in-house lawyers. The section of the legal market is large, complex and diverse and effective and proportionate regulation needs to be informed by a stronger evidence base."