The Pan's Labyrinth filmmaker has expanded his role from producer on the stop-motion animation to encompass a directing position, reports Variety.
Del Toro will be co-director on the movie alongside Fantastic Mr Fox animation director Mark Gustafson.
The film will be set in Italy between the First and Second World Wars.
"It was when everyone was behaving like a puppet, except for puppets," Del Toro said.
He had joined the project in 2008, which originally had Gris Grimly and Adam Parrish King attached as co-directors. Later, Gustafson was announced to be replacing King.
"Little by little, I realised that I should direct," said Del Toro.
He is in line to produce horror romance Day of the Dead, and will also direct Harry Potter star Emma Watson in Beauty and the Beast.
Pinocchio is due to begin shooting in summer 2013.