British actress Emily Watson ("Gosford Park") will join forces with Ben Chaplin ("Stage Beauty") and Alex Etel ("Millions") to star in the pic, "The Water Horse," Variety reports.

Based on the 1998 Dick King Smith novel, the story centres on a lonely boy in Scotland who finds a mysterious egg on the shore of a lake. When the egg hatches, what emerges is a water horse, a mythical sea monster of Scottish legend.

Jay Russell ("Ladder 49") will direct the film that will begin shooting next month, and will be released in theatres in 2007.