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Rumours last month suggested that Law was in talks for the part, with former lover Sienna Miller also tipped for the cast.
However, Ritchie announced at a press conference that British actress Kelly Reilly will star opposite Law as Watson's love interest Mary.
Robert Downey Jr. will play the legendary supersleuth, with Mark Strong as villain Blackwood and Rachel McAdams as Irene Adler.
Ritchie said the film will be different from his usual movies, saying: "I'd like to bring something new to this project - I have a few tricks up my sleeve."
Sherlock Holmes is scheduled for release in October 2009.
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