The project has been in development for the past two years, and the premise of the family film finds the theme park's beloved attractions coming to life.
"Battlestar Galactica's" Ron Moore wrote the most recent draft, although a new writer will soon be hired to rewrite the script under Favreau's supervision.
Disney will be giving Favreau a development deal that will allow him to work on other large-scale studio films while "Magic Kingdom" comes together.
Favreau is just the latest A-list filmmaker that Disney has recently recruited. David Fincher, Sam Raimi and Tim Burton are all attached to direct Disney projects in addition to up-and-coming talent Joseph Kosinski, who is expected to follow "Tron: Legacy" with "Oblivion," a Disney project that is currently being written by Oscar winner William Monahan ("The Departed").
Favreau recently wrapped "Cowboys & Aliens," which is scheduled for release on July 29. He's also expected to direct a third "Iron Man" movie. He's represented by CAA.