The quirky Burton is said to be anxious to tackle the live-action redux of the Disney classic and wants Downey to play the lead as Geppetto, the humble woodcarver who creates the puppet.
The Reporter said the project is being developed by Warner Bros., and neither Burton nor Downey has officially signed on. However, Burton is said to be talking with the studio.
Warner Bros. has been doing well recently with Downey and his "Sherlock Holmes" action franchise, but sources said Downey's calendar is becoming increasingly busy, which could complicate his ability to take part in "Pinocchio."
At the same time, there is a race against other "Pinocchio" projects in the works around Hollywood, THR noted.
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