The film is expected to cost about $38.5m (£27m) and is an adaptation of Art of War, written by Sun Tzu more than 2,000 years ago.
The star of Rush Hour is to take the lead and has helped adapt a martial arts epic based on an ancient military text by a Chinese philosopher.
The film is expected to cost about $38.5m (£27m) and is an adaptation of Art of War, written by Sun Tzu more than 2,000 years ago.
Filming is not expected to start until 2003 and will have a cast of thousands.
Gulf War
"The film will require around 100,000 extras and we need to discuss with authorities in China to see if they would allow some People's Liberation Army soldiers to be in the film," said Tony To, promotions manager at distributors Golden Harvest.
Chan first had the idea of adapting Art of War during the 1991 Gulf War, said To.
The film will hope to capitalise on the success of the Oscar-winning movie Crouching Tiger, Hidden Dragon, which has become the most successful ever foreign language film in the US.
Since release, the film has taken more than $100m (£69m).
Chan is said to be opposed to the liberal use of special effects in modern films and will use them sparingly in the movie.
He is slated to film at least three other movies - including an action adventure, Operation Condor 3 - before work on Art of War is set to begin.
Chan is a major celebrity in Hong Kong, where he was born.
He has made more than 80 films and established himself as a star in the US with movies such as First Strike and Rush Hour.
The actor recently completed filming Rush Hour 2 which will hit the screens later this year.