The game follows journalist Miles Upshur as he investigates mysterious rumours surrounding Mount Massive Asylum, a long-abandoned facility that recently re-opened under new management.
"There are already a lot of great games out there about terrifying monsters that eat brains; we want Outlast's to be scary because you'll know the enemies you face still have them," said Red Barrels co-founder Philippe Morin.
Fellow studio co-founder David Chateauneuf added: "Our team has a lot of previous experience creating big, blockbuster games. We're all really excited to see what kind of fear-based emotional rollercoaster we can build on our own!"
Red Barrels is a new Montreal-based studio made up of industry veterans who have previously worked on series such as Uncharted, Prince of Persia: Sands of Time, Assassin's Creed, Splinter Cell and Army of Two.
Outlast will release on PC some time in 2013.
Watch the first trailer for Outlast below: