The New Girl actress will appear in a stage version of 1980 film Coal Miner's Daugher, which recounted the early life and career of Lynn.
Lynn confirmed the news during her performance at the Ryman Auditorium in Nashville, the original home of the Grand Ole Opry.
Deschanel also appeared to perform a duet with Lynn on the film's title track.
"It's a long way from Butcher Holler to Broadway in New York City. I never imagined I'd see Coal Miner's Daughter on a movie screen, and now I can't believe it's going to be on a stage for people to see," said Lynn, 77, in a statement.
"I'm going to be right there in the front row. And I know Zooey is going to be great - she sings and writes her own songs just like I do, and we even have the same colour eyes!"
Deschanel added: "She is a true legend and to be chosen to play such an iconic woman is a dream come true."
The new musical will contain tracks from Loretta Lynn's back catalogue, with dates, cast and venues to be announced over the coming months.
Coal Miner's Daughter originally starred Sissy Spacek in the lead role, for which she earned an Academy Award for 'Best Actress'.
Deschanel is also part of the musical duo She & Him, who recently released the LP She & Him: Volume 2.
Watch the trailer for 1980's Coal Miner's Daughter below: