Del Toro previously helmed "Pan's Labyrinth" and the "Hellboy" movies.
Watson is best known for her work as Hermione Granger in the Harry Potter film franchise, as well as "My Week with Marilyn."
Andrew Davies, who has adapted numerous literary classics for British television, is to write the screenplay for "Beauty," the entertainment industry newspaper said, without offering details of when and where the story is to be set.
2014: The Year in Fashion [PHOTOS]
Meg Ryan, Kiernan Shipka to star in 'Fan Girl'