New Regency has entered final negotiations to acquire the film, which has the Safe House actor attached to star, reports Deadline.
Favreau will direct the true story of half-brother drag racing enthusiasts Art and Walt Arfons.
They built their own racer The Green Monster together, and after a stint as rivals, united to break the world land speed record three times.
The script was penned by The Bourne Legacy co-writer Dan Gilroy.
Favreau is expected to tackle Battle for Bonneville after completing Jersey Boys.
Reynolds will next be seen alongside Jeff Bridges in R.I.P.D.