The "Hamilton" star is teaming up with Alan Menken, who scored the original 1989 cartoon film, to create songs for the new movie.
Lin-Manuel will also produce the film and supervise the storyline alongside Marc Platt. Moviemakers are currently seeking a screenwriter, reported Deadline.
The 36-year-old star has long admired the animated film.
"It's the movie that's probably most responsible for me being here.
"I started taping the Oscars because I wanted to see Geoffrey Holder's performance of 'Under the Sea'. That was the beginning of the end. Or, the beginning of the beginning, depending on how you look at it... I could sing you not only the songs in Little Mermaid but the music to the score. That's how important those scores are in my life and in my upbringing."
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