The Bourne Identity actor will also star in the movie alongside John Krasinski (The Office), according to Variety.
Damon will not be making his debut in the director's chair on Father Daughter Time: A Tale of Armed Robbery and Eskimo Kisses, as was previously reported.
The new film was originally conceived by Krasinski and author/screenwriter Dave Eggers, who worked together on Away We Go.
The story involves a salesman who is forced to re-evaluate his whole life after arriving in a small town.
Krasinski was previously rumoured to be involved in Damon's first directorial project. The pair are waiting to be given the green light by Warner Bros.
Damon appeared in The Adjustment Bureau earlier this year and will next star in this week's Contagion.
> Matt Damon: 'I'm keeping hope for Bourne return'
Watch the trailer for Contagion below: