The overarching ambition behind the agency - which is known as Aria - will be to seek out ground-breaking discoveries, and it has already been likened to similar entities in the US, which helped to develop innovations like GPS technology.
Business Secretary Kwasi Kwarteng promised the agency will push the boundaries of innovation while "stripping back unnecessary red tape".
Kwarteng said: "From the steam engine to the latest artificial intelligence technologies, the UK is steeped in scientific discovery. Today's set of challenges - whether disease outbreaks or climate change - need bold, ambitious and innovative solutions.
"Led independently by our most exceptional scientists, this new agency will focus on identifying and funding the most cutting-edge research and technology at speed."
On the flip side, Labour shadow business secretary Ed Miliband has questioned the government's plan, saying the agency needs to be given a clear mandate.
He also insisted that its funding needs to be made more transparent.
Miliband explained: "Labour has long called for investment in high ambition, high risk science. But government must urgently clarify the mission and mandate of this new organisation, following strong engagement with the UK's science base - those closest to the work."