The movie is the true story of an Irish woman whose son was sold for adoption in America, and their attempts to reunite with each other.
Variety reports that Dench will play the title character of Philomena Lee, with Coogan starring as journalist Martin Sixsmith. Coogan also co-wrote the screenplay with Jeff Pope.
The film is adapted from Sixsmith's book The Lost Child of Philomena Lee: A Mother, Her Son and a 50 Year Search, which details how Lee was forced by nuns to give up her son Anthony when he was 3.
Anthony was sold for adoption in America, where he grew up to be a successful lawyer and politician. In the 1980s, after he contracted AIDS, he visited Ireland in an attempt to find his mother.
Coogan said of the project: "The film is a comic tragedy or a tragic comedy. It's about two very different people, at different stages of their lives, who help each other and show that there is laughter even in the darkest places."
The actor is to appear in the upcoming Alan Partridge movie and Paul Raymond biopic The King of Soho, while Dench will shortly be appearing in new Bond movie Skyfall.