Commissioner Bud Selig said former Senate Majority Leader George Mitchell, a director of the Boston Red Sox, will lead the inquiry. Mitchell said he will not resign his position.
The probe will be limited to events since September 2002, when the sport officially banned performance-enhancing drugs. No timetable for the investigation was announced.
"Nothing is more important to me than the integrity of the game of baseball," Selig said.
Mitchell also is chairman of The Walt Disney Co., the parent of ESPN, which is a national broadcast partner of baseball. ESPN is airing a weekly behind-the-scenes look at Bonds, with the San Francisco star's cooperation. The show begins airing next week.
John Dowd, the Washington lawyer who headed baseball's investigation of Pete Rose's gambling in 1989, did not like the choice.
"Mitchell doesn't have a great track record with me. It doesn't look like he's independent," Dowd said in a telephone interview with The Associated Press.
Mitchell said his role with the Red Sox will not create a conflict.
"If, in any way, anyone associated with the Red Sox is implicated, they will be treated just like everyone else," he said.
The scandal has made the game's national sponsors squeemish. Bank of America and Home Depot have refused to support any celebration of Bonds' quest for the all-time home run record unless he's cleared of steroid use, reports CBS News correspondent Anthony Mason.
As he left the news conference at baseball's headquarters, Mitchell did not respond to a question about his role with Disney and the possible perception of a conflict of interest.
"While George Mitchell is certainly a man of great integrity, I believe that baseball would have been wiser to pick someone who is not as close to the game and may be able to take a more objective look into the facts," said Sen. Jim Bunning, R-Ky., a baseball Hall of Famer.
Rep. Cliff Stearns, a Florida Republican, praised the probe.
"This investigation should have started years ago; I am deeply concerned with the appearance that Major League Baseball resists taking action to cleanup the sport until it is overwhelmed with demands for action," he said.
Selig's decision to launch the probe came in the wake of "Game of Shadows," a book by two San Francisco Chronicle reporters detailing alleged extensive steroid use by Bonds and other baseball stars.
"I believe the timing on this proper given the charges, given the specificity of the charges for the first time," Selig said.