"Australians are entitled to be reassured that their national security agencies are functioning as effectively as they can be and that anti-terrorism laws are being appropriately enforced," McClelland said.
"Understandably, the Haneef case has prompted some in the community to question this."
Haneef, who had been working as a doctor in a Brisbane hospital, was arrested in July after failed car bombings in London and Glasgow allegedly linked to two of his cousins resident in the UK.
"Australians are entitled to be reassured that their national security agencies are functioning as effectively as they can be"
He was held for almost two weeks before being charged with providing support to a terrorist organisation.
But the case against him fell apart when it was revealed prosecutors had supplied misleading evidence to a court.
By then, the government had cancelled Haneef's visa and he was forced to return to India.
An appeal found that the then-immigration minister made a "jurisdictional error" in cancelling Haneef's visa.
Australia's top police officer, Australian Federal Police commissioner Mick Keelty, later said that he had always believed the evidence against Haneef was thin and that he had passed on his concerns to prosecutors.
Critics accused the conservative government of then-prime minister John Howard of politicising the case to demonstrate its national security credentials in the lead up to national elections, which Howard ultimately lost.
|Haneef's detention was criticised by opponents |
of the Howard government [AFP]
McClelland, whose centre-left Labor Party scored a landslide win in the elections, said the inquiry would not focus on political matters but concentrate on lessons that could be learned from the Haneef case.
It would also not touch on the issue of whether Haneef, now living in Bangalore, India, should be paid compensation.
The investigation will be headed by John Clarke, a former New South Wales state supreme court judge, who is scheduled to present his findings by September 30.
Clarke has said he would consider travelling to India to hear evidence from Haneef.
Speaking to Australia's Sky News, Haneef's lawyer Peter Russo said his client would welcome the inquiry into a case that had "turned his life upside down".