The news comes amid rumours that Dia Mirza had been chosen for the film. However both Vidhu Vinod Chopra and Dia Mirza have denied it.
Hirani is said to have taken the decision after he saw Vidya's performance in "Parineeta".
"Lage Raho Munnabhai" is scheduled to begin shooting May 1 with Sanjay Dutt allotting priority dates to the film. The movie has been slotted for a Dec 25 release.