This Is That's Ted Hope and Anne Carey will produce along with Killer Films' Christine Vachon and Pam Koffler. Hope, Vachon and Knoxville previously worked on Waters' 2004 comedy A Dirty Shame.
Fruitcake charts the exploits of a boy named after his favourite dessert who goes on the run after he is caught stealing meat with his parents.
'Fruitcake is a deliciously fun, holiday adventure that will appeal to audiences of all ages worldwide,' 2929 International president Shebnem Askin.
2929 International's slate includes festival closer What Just Happened', James Gray's competition entry Two Lovers starring Joaquin Phoenix and Gwyneth Paltrow, and The Road with Viggo Mortensen, Guy Pierce and Charlize Theron.