The actor will take on the role of a roguish chief of a covert German spy unit in Anton Corbijn's spy thriller, Deadline reports.
A Most Wanted Man, based on the novel by John le Carré, tells the story of a dying man who arrives in Hamburg's Islamic community in search of his late Russian father's ill-gotten fortune.
Ides of March star Hoffman, who has been linked with the project since February, will play a character named Bachmann, who is keeping a close watch on the protagonist.
Edge of Darkness scribe Andrew Bovell will provide a screenplay for the film, which will begin shooting in Hamburg in September.
A Most Wanted Man is expected to arrive in cinemas in 2013.
Watch Philip Seymour Hoffman in the trailer for The Ides of March below: