"This is a happy moment for the Indian film industry," producer Vidhu Vinod Chopra said.
"For the first time an Indian film will be remade by Hollywood for an international audience."
The English version of the film, called Gangster MD , will be directed by US-based Indian director Mira Nair.
Chopra will co-produce the adaptation to be distributed through Fox Entertainment Group's Twentieth Century Fox.
Munnabhai MBBS was one of the biggest Indian hits of 2004, with actor Sanjay Dutt in the role of a low-level gangster who wants to become a doctor to win the girl he loves.
Prior to Munnabhai, Chopra was nominated for an Oscar in the short film category in the 1980s for An Encounter With Faces , a documentary on Bombay's street children.