Robert Downey Jr will be seen as Geppetto in the tale, about a wooden puppet (Pinocchio), who wants to become a human boy.
"The Giver" writer Michael Mitnick penned the latest draft of "Pinocchio," said The Hollywood Reporter.
Bryan Fuller and Jane Goldman wrote previous drafts of the story that is based on a novel by Carlo Collodi.
Anderson has been eyed to also direct the film.
Downey, 50, was poised to star in Anderson's "Inherent Vice", which received an Oscar-nomination for screenplay this year until his "Avengers: Age of Ultron" obligations got in the way and Joaquin Phoenix stepped in to play the lead.
Downey has been developing "Pinocchio" for years, but the project has found new urgency in the wake of a string of live-action hits based on kids' classics, most recently Disney's Cinderella.
He will also produce "Pinocchio".
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