Reports suggest the comic is set to reprise his role of divorced dad Daniel Hillard, who cross-dresses as a nanny so he can see his kids.
The movie was a box office sensation, grossing $441 million worldwide, and studio bosses at Fox 2000 are hoping to find similar success with "Mrs. Doubtfire 2."
An insider tells TheWrap.com that Chris Columbus will also return to direct the movie, while a script will be penned by "Elf" writer David Berenbaum.
In 1994, Williams won a Golden Globe for Best Actor in a Musical/Comedy for the role, while the movie was named Best Picture (Musical/Comedy). It co-starred Sally Field, Pierce Brosnan and "Matilda" star Mara Wilson.