Del Toro has been associated with the project as a producer since last summer, and has publicly mentioned Watson as an ideal actress to portray the female lead.  Now, though, Variety reports that the man behind Cronos, Hellboy, The Devils Backbone, and Pan's Labyrinth has signed on with Warner Bros. to direct the film.

Watson, meanwhile, is in final negotiations to star in Beast.  The actress has spent the last decade playing Hermione Granger in the Harry Potter series, but that wrapped up with Harry Potter and the Deathly Hallows: Part 2.  She's currently appearing in My Week With Marilyn and will star later this year in Stephen Chbosky's The Perks of Being a Wallflower.

The director will prepare a treatment, which will then be turned into a screenplay by newly-hired writer Andrew Davies.  Davies is probably best known for adapting Bridget Jones's Diary and its sequel Bridget Jones: Edge of Reason.  He also penned The Tailor of Panama and the 2008 adaptation of Brideshead Revisited.  More recently, he contributed to The Three Musketeers, last year's 3D actioner directed by Paul W.S. Anderson.

After spending some time attached to The Hobbit films and trying to get his dream project At the Mountains of Madness made, del Toro went to work on Pacific Rim, a summer movie that pits massive monsters against human piloting anime-inspired mecha.  That film, which stars Charlie Hunnam, Idris Elba, and Charlie Day, is set for May 10, 2013. The Beast news suggests that del Toro's take on Frankenstein hasn't picked up any momentum, nor has At the Mountains of Madness.

Del Toro has vowed that he'll never make a movie without a monster in it, and he'll surely provide a memorable beast.  Regular del Toro collaborator Ron Perlman played the character on television in the late 1980's, so that might be a stretch, so put your money on Doug Jones to be wearing layers of prosthetics as the title character in Beast.