Film industry bible Variety reported the news on Wednesday, adding that sources say King has given his blessing to McGregor's casting.
Mike Flanagan, who helmed Netflix's adaptation of the King novella "Gerald's Game", is directing. Flanagan's frequent collaborative partner Trevor Macy will produce alongside Vertigo Entertainment's Jon Berg.
Doctor Sleep picks up with Danny decades after the events of The Shining, when he follows in his father's footsteps of alcoholism and anger issues, blotting out his lingering trauma and his "shining" abilities with his drinking problems.
Warner Bros. had been developing this film, as well as "The Shining" prequel "Overlook Hotel", for years, but the studio struggled to secure a budget for either film. The character is now a rage-filled alcoholic whose "shining" powers return when he begins to embrace sobriety.
Getting sober revives Danny's powers, and he tries to put them to good use by working with terminally ill hospice patients. The movie is adapted from Stephen King's sequel to "The Shining", which Stanley Kubrick adapted into one of horror's most iconic movies in 1980.
Ewan McGregor is checking into the Overlook Hotel. But after forging a bond with a young girl who also possess the same power, Danny discovers that there are bad people out there with similar gifts - and they want the girl dead. He is repped by UTA.