Battle Royale II director Fukasaku is set to direct the $10m film from a script by Oshii - director of acclaimed anime titles Ghost In The Shell and its sequel Innocence.
Set in the near future in Japan, Rebellion depicts the fierce conflict between refugees from the rest of Asia, who have flooded into Japan when their economies have collapsed, and the Japanese armed police.
Toei is co-financing the project with Japan's Cinema Investment Corporation which finances films through the Independent Film Fund (IFF) and the Angel Award for innovative new producers. The company is also in talks with Hong Kong's E Entertainment and Korea's Barunson Films about boarding the film as co-producers.
The cast will be headed by an as yet-to-be-confirmed Japanese actress, who will play a feisty rebel leader, alongside Taiwanese actor Dylan Kuo.
The crew will include Korean DoP Kim Sung-bok whose credits include mega-hits Shiri, JSA and Silmido. Production is scheduled to start in the second half of the year.
Toei's Cannes line-up also includes Taku Shinjo's For Those We Love, about Second World War kamikaze pilots, which opened on May 12 in Japan and took the number three spot.