Bruce Willis will play a character based on a real person

Willis plays a real-life army general who investigated the murder of hundreds of Vietnamese villagers by US soldiers.

Stone, 60, is said to be closing a deal with Hollywood film studio United Artists, who will finance the project.

Called Pinkville, it will be Stone's fourth film set in Vietnam, including the 1987 Oscar-winner, Platoon.

Starring Charlie Sheen and Forest Whitaker, the movie scooped four Academy awards, including best director and best film.

Stone also won two Oscars for Born on the Fourth of July, which starred Tom Cruise - now a co-owner of United Artists - while Heaven and Earth won a Golden Globe in 1994.

Stone has already directed three films based on the Vietnam War

Filming on Pinkville is likely to start next year with a budget of about $40m (�19.9m).

Willis, most recently seen in Die Hard 4.0, will step into the shoes of William R Peers, who was appointed to investigate the My Lai massacre and its subsequent cover-up by the US Army.

More than 400 witnesses were questioned and 20,000 pages of testimony taken before the inquiry reported its findings in March 1970.

Actor Channing Tatum, who appeared in Step Up, has also been lined up to play a military helicopter pilot who curtailed the killing by placing his craft between villagers and soldiers.

Iran plan

Meanwhile, the Iranian President has reacted to reports that Stone plans to make a film about him.

Mahmoud Ahmadinejad said: "I have no objection, generally speaking, but they have to let me know what are the frameworks."

In the past Stone has made films about former US presidents John F Kennedy and Richard Nixon.

Ahmadinejad, a critic of US policy in the Middle East, swept to presidency in 2005 pledging to share out Iran's oil wealth more fairly.

Since his election he has taken a tough stand on a number of foreign policy matters, in line with his hard-line background.

His call for an end to the Israeli state and describing the holocaust as a myth have drawn widespread condemnation from the West.