Venables, who killed James Bulger in 1993 with Robert Thompson, was recalled to custody last month for breaching the terms of his licence.
Reports have alleged he was found with child sex abuse images on his computer, but ministers have confirmed only that he faces "serious allegations".
The Parole Board process is likely to take many months. It will not be concluded until the end of any criminal proceedings against Venables, which take precedence.
The spokesman said: "The Parole Board will now start the process of reviewing this case in the normal way."