Seth Rogen and Zac Efron are also on board to as Mac and Kelly, with Chloe Moretz joining the cast, reported Variety.
Franco, 30, played a fraternity brother to Efron's character in the original comedy.
Directed by Nicholas Stoller, "Neighbors 2: Sorority Rising 2" will be produced by Rogen, Evan Goldberg and James Weaver under their Point Grey Pictures banner.
The sequel written by Andrew Jay Cohen, Brendan O'Brien, Seth Rogen and Evan Goldberg is slated for May 2016 release.