The concert series will feature Costello in a rare acoustic gig as well as appearances by Gogol Bordello and country singer Emmylou Harris.
Other acts performing on the bill include folk legend Ramblin' Jack Elliot, Mavis Staples, Amos Lee and bluegrass banjo player Earl Scruggs.
Organizers have also confirmed that more acts will be added to the lineup as the event draws closer.
The festival has long been known for memorable moments, including Joan Baez's famed surprise appearance during the inaugural concert and Bob Dylan's electric debut in 1965.
The Newport Folk Festival is to be held from July 29 to July 30 in Newport, Rhode Island.
It was previously reported that Costello will be reviving the 'Spinning Songbook' concept on his upcoming tour.
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Watch Joan Baez and Judy Collins perform 'Diamonds And Rust' at the 2009 Newport Folk Festival below: