Opera Australia's artistic director, Lyndon Terracini, made the announcement, adding the Tony Award-winning choreographer Christopher Gattelli would also be part of the creative team, reported Sydney Morning Herald.
Andrews, 79, famously played the role of Cockney flower girl Eliza Doolittle in the 1956 Broadway production, opposite Rex Harrison.
It was her second Broadway role and the one that helped launch her career. She went on to win an Academy award for her performance in Mary Poppins and was nominated for her roles in "The Sound of Music" and "Victor/Victoria".
Based on George Bernard Shaw's Pygmalion, "My Fair Lady" tells of the flower girl mentored by Professor Henry Higgins and transformed into a society lady. The stage production features music by Frederick Loewe and lyrics by Alan Jay Lerner. Audrey Hepburn starred in the 1964 film adaptation.
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In 2003, Andrews directed a production of The Boy Friend, which was her 1954 Broadway debut show. She has also directed stage productions of her children's book "The Great American Mousical".
Terracini said, "It is indeed a privilege to work with Dame Julie Andrews as she creates a new My Fair Lady that will capture the magic of the world's greatest musical for a new generation of classic musical lovers.