Both Williams, now 62, and director Chris Columbus are "attached" to the project, with Elf writer David Berenbaum signed on for the script.
Mrs. Doubtfire, which pulled in more than $222 million worldwide, was the second-highest grossing film of 1993.
It's unclear whether any of the other original stars, including Sally Field and Pierce Brosnan, will be asked to return. But Matthew Lawrence, who played one of Williams' children in the film, told TMZ on Thursday that he would be happy to participate.
Mara Wilson, who played Williams' youngest daughter, is now 26. She criticized the project in a series of tweets.
"For the record, no, I do not have anything to do with the Mrs. Doubtfire sequel, nor will I," she wrote. "I've been in some mediocre movies, but I've never been in a sequel. And I have no interest in being in one now."
"Sequels generally suck unless they were planned as part of a trilogy or series. I think Doubtfire ended where it needed to end," she added. "They haven't asked me to be in it, and I think it would be weird if they did! I don't act much and am not a cute little kid anymore."