Walden Media will produce it and New Zealander Andrew Adamson, best known for his work on the Oscar-winning animated feature "Shrek," will direct.
"We are extremely happy and excited to be starting work on the film in New Zealand," Wellington's Dominion Post Newspaper quoted Adamson as saying.
The movie is expected to be the first of five films based on Lewis' seven Chronicles of Narnia books, to which Walden holds the film rights.
Director Peter Jackson made J.R.R. Tolkien's "The Lord of the Rings" into a three-film feature in New Zealand over the past four years using its unspoiled landscapes.
The $110 million budget film will start production preparations early in 2004, although work on the Chronicles has already started at New Zealand director Peter Jackson's Weta Workshop in the capital, Wellington.
A spokeswoman for Weta confirmed it was currently working on the project, but declined to give details.
Shooting, much of it in South Island forests, high country and coastal areas, will begin mid-2004, the reports said.
Taxpayers will help foot the bill for the film, which will be made using a screen production grant scheme set up by the government this year.
Under the scheme, production companies can receive up to 12.5 per cent of their total costs back at the end of production.
Economic Development Minister Jim Anderton said the decision to make the movie in New Zealand was "a vote of confidence in our country as a location for film and screen production."
"The Lion, The Witch and The Wardrobe," published in 1950, is the second and best-known novel in the seven-part Narnia series. It also includes "The Magician's Nephew," "The Horse and His Boy," "Prince Caspian," "The Voyage of the Dawn Treader," "The Silver Chair" and "The Last Battle."
The Chronicles of Narnia series has sold over 60 million copies worldwide and is currently published by HarperCollins.