The film stars Watts as Gertrude Bell, an explorer, writer, archaeologist and attache for the British Empire, who is credited with helping to catalyze the formation of the Middle East at the dawn of the 20th century, said the Hollywood Reporter.
"It is great to be working with Herzog again on this epic story as Ms Bell been called the female 'Lawrence of Arabia'," said producer Nick Raslan.
Raslan will produce via his Palmyra Films banner along with Cassian Elwes and Michael Benaroya. Benaroya's Benaroya Pictures banner will finance the film.
Law, 39, was most recently in theaters with "Sherlock Holmes: A Game of Shadows", as well as "Hugo", "360", "Hugo and Contagion".