Mental health campaigner Patrick McGorry is to head a special advisory panel established by the federal government to guide reform within the sector.

Mental Health Minister Mark Butler said the 12-member group will provide key input as the government moves to dramatically overhaul mental health services.

The government has made mental health a priority in its second term, conceding earlier this year that significant reform was needed.

"The government is very aware of the need," Mr Butler said in a statement on Thursday.

"It is important that this process is influenced and informed by experts, service providers and people in the community affected by mental illness."