From 28 May, anyone who tests positive for coronavirus will be contacted by NHS Test and Trace and will be required to share information about their recent interactions.
This could include household members, people they have been in direct contact with, or within two metres of for more than 15 minutes.
People identified as having been in close contact with someone who has tested positive must stay at home for 14 days, even if they do not have symptoms, to stop unknowingly spreading the virus.
The service will help identify, contain and control coronavirus, reduce the spread of the virus and save lives.
Health and Social Care Secretary Matt Hancock said: "As we move to the next stage of our fight against coronavirus, we will be able to replace national lockdowns with individual isolation and, if necessary, local action where there are outbreaks.
"NHS Test and Trace will be vital to stopping the spread of the virus. It is how we will be able to protect our friends and family from infection, and protect our NHS.
"This new system will help us keep this virus under control while carefully and safely lifting the lockdown nationally."
Here's everything you need to know about it:
How does the system work?
Anyone who tests positive for coronavirus will be contacted by NHS Test and Trace and will be required to share information about their recent interactions.
People identified as having been in close contact with someone who has tested positive will then also be contacted, and will be told they must stay at home for 14 days, even if they do not have symptoms.
If those in isolation develop symptoms, they can book a test at nhs.uk/coronavirus or by calling 119 if they do not have internet access.
If they test positive, they must continue to stay at home for seven days or until their symptoms have passed. If they test negative, they must complete the 14-day isolation period.
Members of their household will not have to stay at home unless the person identified becomes symptomatic, at which point they must also self-isolate for 14 days.
People who are contacted by the NHS Test and Trace service will be given clear information explaining what they must do and how they can access local support if needed.
Will the system be able to keep up with demand?
The service, including 25,000 dedicated contact tracing staff working with Public Health England, will have the capacity to trace the contacts of 10,000 people who test positive for coronavirus per day.
It can be scaled up if needed.
It will focus on identifying and containing potential outbreaks in places such as workplaces, housing complexes, care homes and schools.
This will help to ensure testing capacity is deployed effectively and helping the most vulnerable in self-isolation access essential services in their area.
Do I need to download an app?
The NHS Test and Trace service is separate from the Government's plans to launch a NHS Covid-19 tracing app, and you do not need to download anything to your smartphone.
Work is still continuing on that app before it can be launched across the rest of the UK.
Following its roll-out on the Isle of Wight, more than 52,000 people on the island downloaded the app in the first week.
A spokesperson for the Department for Health said the app "will significantly extend the speed and reach of contact tracing, by helping to identify those who you may not know, such as someone sitting next to you on public transport.
"The app will also give powerful insights into the spread of the virus and how to contain it."
Do I need to wait to be contacted before I get a test?
You do not need to wait until you have been contacted by the NHS Test and Trace service before you are able to get a test for Covid-19.
Also from today, all symptomatic individuals in England will be able to access a test if they need one.
Anyone with a new, continuous cough, a high temperature or a change in their sense of smell or taste is asked to immediately report these symptoms and book a test at nhs.uk/coronavirus.
What does the new service mean for lockdown?
Professor John Newton, National Coordinator of Test and Trace, said: “At this critical point in the nation’s response to coronavirus we are launching a service that will enable us to emerge more safely from lockdown.
“To control the virus we still need to continue with social distancing and good hygiene, but we also now have a comprehensive test and trace service to stop new cases spreading.
“This approach will allow us to gradually return to more normal personal, social and economic lives while recognising that we have to stay alert and respond rapidly to any advice from the new service.”
The Government's advice remains to stay at home as much as possible, work from home if you can and limit contact with other people remains until further notice.
What about the rest of the UK?
For now, the new NHS Test and Trace service applies to England only, but the Government "continue to work with Scotland, Wales and Northern Ireland to make sure we have systems that are coordinated across the UK."
Northern Ireland has its own version of the programme up and running, while Scotland has announced its own system will also start on Thursday; Wales' scheme is due to start in early June.