"Take Me To The River (2016)" director Matt Sobel will shoot the Amazon Studios project, which revolves around twin brothers who are sent to stay with their mother, only to suspect the woman all bandaged up is an imposter.
The psychological thriller will be executive produced by Watts, alongside the original movie's filmmakers Severin Fiala and Veronika Franz, reports Variety.
In a statement, Sobel said, "My favorite films are those that invite the audience to step inside their protagonist's journey."
"In our re-imagining of 'Goodnight Mommy', fear of abandonment - and the dreadful realization that those close to us may not be who they seem - create an immersive nightmare, with visceral sensations front and center."
"I can't wait to create this heart-stopping story with Amazon and the peerless Naomi Watts."
The 2014 release of "Goodnight Mommy", starring Susanne Wuest as Mother and Elias Schwarz and Lukas Schwarz as her twin sons, was selected as Austria's submission for the Oscars, but failed to land a nomination in the Best Foreign Language Film category.
Kyle Warren writes the script with David Kaplan, Joshua Astrachan, Valery Guibal and Nicolas Brigaud-Robert producing. Joining Watts, the original film's directors Severin Fiala and Veronika Franz are tapped to serve as executive producers.