The campaign comes following a survey by NetMums which found that two thirds of parents are worried about the amount of sugar in their children's diets and nearly half believe their family consume too much.
The Change4Life campaign will offer parents tips on how to swap sugary foods in their diet for healthier items - for example swapping ice cream for yoghurt and sugary drinks for sugar-free drinks.
Health guidelines advise that 10% of a person's daily energy or calorie intake should be made up of sugar, but the Department of Health fear children aged four to 10 years old could be consuming far more.
Children aged 4-10 get 17% of their daily sugar from soft drinks; 17% from biscuits, buns, cakes, pastries and fruit pies, 14% from confectionery, 13% from fruit juice, and 8% from breakfast cereals .
Ahead of the campaign launch, PHE worked with NetMums and the University of Reading to advise 50 families on sugar swaps and found on average their sugar intake was reduced by 40% over the period of a month.
Professor Kevin Fenton, national director of health and wellbeing at PHE, said: "Reducing sugar intake is important for the health of our children both now and in the future. We are all eating too much sugar and the impact this has on our health is evident.
"This campaign is about taking small steps to address this. We know from past campaigns that making simple swaps works and makes a real difference.
"This year we wanted to be even more single minded in our approach, which is why we are focusing on sugar alone. The family challenge highlights that simple swaps could lead to big changes if sustained over time."
As well as causing obesity, consuming too much sugar can have a serious affect on dental health. The National Dental Epidemiology Programme for England found tooth decay was the most common reason for hospital admissions for children aged five to nine in 2012-13.
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Data released by the Health and Social Care Information Centre last month found more than one in five (22.5%) children in reception class were classified as overweight or obese, while over a third (33.5%) of those in year 6 were overweight or obese in 2013/2014.
Dr Daniel Lamport, research fellow at the University of Reading and challenge data collection coordinator, said: "It is fantastic to see that the sugar swaps resulted in a reduction in sugar intake for these families.
"The University of Reading is delighted to support preventative health campaigns such as this which can help make a real difference to the health of the nation."
The NetMums survey questioned 687 parents of children aged 5-11 and 1720 parents of children of all ages online in October.
Parents can apply for a sugar swap pack by searching Change4Life online.
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