The book will be called, "The Further Tale of Peter Rabbit," Penguin announced Thursday. The story will be set in Scotland, where Peter Rabbit creator Beatrix Potter visited as a child.
Thompson has worked on other projects for children including "Nanny McPhee," her film adaptation of Christianna Brand's Nurse Matilda stories.
Thompson won an Oscar for her leading role in 1992's "Howards End." She won a second Oscar in 1996 for best adapted screenplay for "Sense and Sensibility."
The Associated Press contributed to this report.