The film is titled Detective Pikachu, based on the gaming franchise.
Rob Letterman (Goosebumps) is directing the project, which is due to start shooting mid-January in London.
The concept of Pokemon, which launched with a video game that transformed into a card-collecting, TV and movie franchise phenomenon, sees players acting as trainers who collect cute but powerful monsters called Pokemon in order to compete in battle tournaments.
Pikachu is a species of Pokemon, while Detective Pikachu the character is a peculiar sort from the Pikachu set, a self-styled investigator who is good at finding things. Reynolds will play the titular Detective Pikachu.
The story is kicked into gear when Smith's character's father is kidnapped, forcing the teen to team up with Pikachu in order to find him. Newton is a sassy journalist who helps them on their quest.
The role is said to be motion-capture in nature, sources say.
Many details of the project are being kept off the grid, including the casting, which has been underway under the radar by the usually secretive Legendary.
The company has high hopes for the feature project, as the Pokemon franchise has sold 300 million video games worldwide, shipped 23.6 billion TCG cards to 74 countries, and has produced an animated series spanning 20 seasons.
Alex Hirsch and Nicole Perlman wrote the latest draft of the script. Universal Pictures is handling distribution of the live-action film outside Japan; Toho will handle distribution in Japan.
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