Jolie has co-written the script with Loung Ung, adapted from Ung's harrowing book First They Killed My Father: A Daughter of Cambodia Remembers.
The film will premiere on the streaming service in 2016.
Jolie's son Maddox - who was adopted from Cambodia in 2002 - will also be involved in the production.
The actress-turned director said she was "deeply affected" by the book and admits the film will be "hard to watch".
"It deepened forever my understanding of how children experience war and are affected by the emotional memory of it.
"And it helped me draw closer still to the people of Cambodia, my son's homeland."
Now a human rights activist in Cambodia, Ung was 5 years old when the Khmer Rouge regime assumed power over Cambodia in 1975, beginning a four-year reign of terror and genocide in which nearly 2 million Cambodians died.
Her memoir tells how she was forced from her family's home in Phnom Penh and trained as a child soldier in a work camp for orphans; while her six siblings were sent to labour camps.
Jolie first got in touch with Ung more than a decade ago after first reading the book, which was published in 2000.
"Angelina and I met in 2001 in Cambodia, and immediately, I trusted Angelina's heart," said Ung.
"Through the years, we have become close friends, and my admiration for Angelina as a woman, a mother, a filmmaker and a humanitarian has only grown.
"It is with great honour that I entrust my family's story to Angelina to make into a film."
Jolie, who is also a UN Special Envoy for refugees, made her feature film debut as a director with 2011's In the Land of Blood and Honey, set during the Bosnian war.
Her 2014 film Unbroken was nominated for three Oscars. It starred British actor Jack O'Connell as Olympian and World War Two prisoner of war survivor Louis Zamperini.
Netflix Chief Content Officer Ted Sarandos said they were "proud" to be working with Jolie on such an "emotionally powerful and ultimately uplifting story".
"Loung Ung's incredible journey is a testament to the human spirit and its ability to transcend even the toughest circumstances," he said.
Angelina Jolie is to direct a film about children caught up in Cambodia's Khmer Rouge regime for Netflix, based on a memoir by a former child soldier.