Producer Wali Razaqi tells The Los Angeles Times that the 24-year-old actress will play Lovelace, while Bill Pullman has been cast to play Hugh Hefner in the period drama "Inferno."
Razaqi says the movie will be based on the life of Lovelace, who shot to fame with the landmark 1972 porno movie "Deep Throat." He says the drama will delve into the "difficult stuff she went through and overcame."
Razaqi said he and director Matthew Wilder are confidant the "Mean Girls" star will deliver.
"I would say it's probably one of the most challenging roles any actor could play and not because of the sexual content, necessarily but more because she was so battered and beat up emotionally, that I think it's gonna take everything Lindsay has to really be able to pull it off," he told the Times.
"Not that Lindsay's life is similar in any way but she's been through a lot of ups and downs. A lot of times you're loved and then you're hated, and I think she can relate to those emotions and feelings."
Razaqi added that an official announcement about the film's casting will be made at the upcoming Cannes Film Festival.
Lohan's agent Nick Styne and manager, Justin Grey Stone, could not immediately be reached for comment early Wednesday.
Lovelace, whose real name was Linda Susan Boreman, starred in several adult films but gained stardom with the runaway hit "Deep Throat," one of the first porn movies to reach into mainstream culture.
She later denounced her pornography career and became a spokeswoman for the anti-pornography movement.
In her autobiography "Ordeal," Boreman revealed that she gave birth to a son out of wedlock when she was 20, and that her mother put him up for adoption.
Boreman died in 2002 following a car crash in Denver.
Last month, Lohan was reportedly fired from her new movie, "The Other Side," before production even began.
Director David Michaels would only say that his team had chosen to move on. In the movie, which also stars Woody Harrelson, Giovanni Ribisi, Dave Matthews and Alanis Morissette, Lohan would have played a grad student on a desert island.
Lohan hasn't starred in a profitable film since 2004's "Mean Girls." Her last movie 2007's flop "I Know Who Killed Me."
Pullman made his film debut in a supporting role in 1986's "Ruthless People" and later appeared in such films as "Spaceballs," "Independence Day" and "Scary Movie 4."