The actor will make a special appearance in the Rajesh Mapuskar-directed Ferrari Ki Sawaari.
"Vidya is expected to go ultra-glam in her new avatar. The item song, which is still a work in progress, is expected to be a major part of the film," said a statement.
"The choreographer is still undecided though the shoots are expected to commence in early February."
The film, which comes out under the banner of Vinod Chopra Films, stars Sharman Joshi in his first lead role.
The soundtrack to Balan's last project The Dirty Picture has produced a number of hit tracks.
Ferrari Ki Sawaari is due to release April 27.