The announcement comes 22 years after the release of the original animation, while a highly successful stage musical has been running  since 1997.
Favreau was behind this year's new version of The Jungle Book, featuring a mix of animation and live action.
He has tweeted that he is "excited" for his "next project", using emojis of a lion and a crown.
Disney said the new version would feature hit songs from the 1994 film, which were written by Sir Elton John, Sir Tim Rice and Hans Zimmer and included Circle of Life, Hakuna Matata and Can You Feel the Love Tonight.
The original Lion King movie made $969m (Â£745m) and won two Oscars.
The stage musical has taken more than $6bn (Â£4.6bn) in ticket sales - more than any other stage show or cinema release in box office history.
It is the latest in a long line of classics to get the live action treatment, and comes after Disney recreated Cinderella, Alice in Wonderland and Sleeping Beauty's Maleficent for the big screen.
A new live action version of Beauty and the Beast, starring Emma Watson as Belle, is due for release next year and will also feature songs from the original animation.
Favreau will also direct a sequel to The Jungle Book, which has made $965.8m (Â£743m) around the world since its cinema release.
No release date for the new Lion King film yet been set and casting is yet to be announced.
Follow us on Twitter @BBCNewsEnts, on Instagram, or if you have a story suggestion email entertainment.news@bbc.co.uk.
The Lion King is to be remade as a live action film directed by Jon Favreau, Disney has announced.