The new project titled "Aloha" is an 'island-set comedy' and both Stiller and Hill will also serve as producers for it, The Hollywood Reporter said.
"The Muppets" scribe Nicholas Stoller is in talks to write the script, which is based on Hill's idea that he fleshed out on the set of "The Watch".
Last seen in "21 Jump Street", Oscar-nominated Hill has nabbed roles in a number of high-end films, including Quentin Tarantino's "Django Unchained", Martin Scorsese's "The Wolf of Wall Street", and Seth Rogen's "The End of the World".
Stiller, meanwhile, will next be seen in "The Secret Life of Walter Mitty" remake.
Hill and Stiller's "The Watch" will hit theatres in the US on July 27.
