Director Gilliam cast Depp as time travelling advertising executive Tony Grisoni in the film a decade ago, when it was titled The Man Who Killed Don Quixote.
A series of disasters, including financial problems and the destruction of sets, shelved production of the oddball epic, and now the Pirates of the Caribbean star has been forced to bow out, citing scheduling conflicts.
Gilliam has announced McGregor will take on the Grisoni role, opposite Robert Duvall as Quixote, stating, "There's a lot of colours to Ewan that he's not been showing recently and it's time for him to show them again.
"He's got a great sense of humour and he's a wonderful actor. He's wonderfully boyish and can be charming - when he flashes a smile, everybody melts. He wields it like a nuclear bomb!"
He's not the only replacement in the film - French actor Jean Rochefort was originally cast as Quixote.
The early disasters that crippled the film were chronicled in the 2002 documentary Lost in La Mancha.
Director Gilliam lined up Depp in 2000 to star as advertising executive Tony Grisoni in The Man Who Killed Don Quixote, but a series of disasters including scheduling conflicts, financial issues and weather-damaged sets delayed production of the oddball epic, prompting the Pirates of the Caribbean actor to bow out.
Gilliam is determined to make sure the film finally goes into production in 2010, and he's hoping the addition of The Godfather star will finally help the project get off the ground.
He says, "Well, it's up, we're getting going again. As Bobby (Duvall) says, we don't have the money, yet. I just think he's phenomenal. I sent him the script, he's so excited by it. If I get Robert Duvall talking as he was on the phone, with that kind of excitement, energy and childish enthusiasm, I thought, 'This is going to be great.' I just think he's extraordinary."
Director Terry Gilliam lined up Depp in 2000 to star as advertising executive Tony Grisoni in the movie, originally entitled The Man Who Killed Don Quixote.
A series of disasters delayed production of the oddball epic, prompting the Pirates of the Caribbean actor to bow out.
Now the 68-year-old film-maker is said to be eyeing Irish actor Farrell as a possible replacement as he finally gears up to begin filming next year (10).
A source tells Britain's Daily Express, "Terry is a fan of Colin and it's felt he's one of the few people capable of filling Johnny's shoes.
Both Depp and Farrell were among the stars who stepped in to help Gilliam complete his 2009 adventure The Imaginarium of Doctor Parnassus after its star Heath Ledger passed away last year (08).