The Alice In Wonderland director has been approached to helm the project, while Downey Jr - currently starring in Sherlock Holmes: A Game Of Shadows - has "expressed serious interest" in playing puppet master Geppetto, according to The Hollywood Reporter.
The script, by Pushing Daisies creator Bryan Fuller, apparently sees Geppetto attempt to reunite with Pinocchio after his wooden creation goes missing.
American Beauty's Dan Jinks is set to produce and Warner Bros is keen to sign Burton and Downey Jr as soon as possible so that the film can be fast-tracked.
Speaking on the announcement of Pinocchio in September, Jinks declared: "I think we've found a fresh approach that's going to be very entertaining."
Depending on its release date, the movie could be competing against Shawn Levy's Pinocchio prequel The Three Misfortunes of Geppetto and a stop-motion version of the story from Guillermo del Toro.