The 'You Bring Me Joy' singer will take to the stage for a special performance of the hit show on November 14.
Lily announced her addition to the 'POP Goes the Musical' lineup at London's Theatre Royal, home of Shrek the Musical, this morning (October 29), posing alongside Children in Need mascot Pudsey wearing green ogre ears.
"Shrek the Musical is loved by people of all ages, I'm thrilled to be a part of it," she said. "I can't wait to start rehearsals."
Previous female celebrities to have taken on long-term roles in Shrek the Musical include Amanda Holden, Kimberley Walsh and Hollyoaks actress Carley Stenson.
This year's 'POP Goes the Musical' has already seen Alexandra Burke join the cast of Les Misérables, Blue star as the Jersey Boys and Geri Halliwell perform in Singin' in the Rain.
Joe McElderry was last week confirmed to be playing in Thriller Live alongside Stooshe and Macy Gray on November 15.
For tickets to Lily's performance, visit www.shrekthemusical.co.uk.