Russia's Andrei Konchalovsky, who previously made Siberiada, Romance For Lovers, and House Of Fools, will direct the musical, based on the story made famous by Tchaikovsky's ballet, which will feature lyrics by Tim Rice.
Details of the UK-US-Hungarian co-production are still being worked out, but the budget is expected to be between $60m and $80m.
Hungarian producer Jozsef Cirko previously worked with Konchalovsky on Hallmark's 2003 production of The Lion In Winter, which shot in Hungary and Slovakia.
Cirko said The Nutcracker would be comparable to Moulin Rouge in scale. He said the film would feature 'two or three A-list stars,' but could reveal no names.
Cirko's HCC Media is the Hungarian co-producer, with Paul Lowen's Shepperton Studios-based Noisette Productions putting together the US and UK partners.
The film will shoot entirely in Hungary from mid-May and should wrap in late August. Post-production, including CGI and other visual effects, will be done in Hungary and in the UK.
Stern Film Studios, a new full-service facility in the Budapest suburb of Pomaz, recently wrapped production on Eichmann, a UK-German-Belgian co-production based on the final confession of high-ranking Nazi Adolf Eichmann.