The story involves a merman venturing on to dry land to win back his mermaid fiancée from a human, says Variety.
Jennifer Abu Hollander wrote the script for the project, based on an idea she originated with Jeff Moskowitz.
Merman is Grazer's second sea comedy after 1984's Tom Hanks-Daryl Hannah vehicle Splash. The project marked Grazer's first collaboration with director Ron Howard. The pair later formed Imagine Entertainment and went on to make movies such as Apollo 13, The Da Vinci Code and Frost/Nixon.