Italian director Susanna Nicchiarell will begin shooting the film, titled Nico, 1988, which primarily follows the musician's later years when she battled heroin addiction, next month (Nov16).
Trine, the winner of this year's Best Actress Silver Bear award at the Berlin Film Festival for her role in Danish drama The Commune, will play the singer.
Nico, who passed away in 1988, appeared on the band's iconic debut 1967 album The Velvet Underground & Nico. She was also one of pop art pioneer Andy Warhol's muses at his Factory studio.
"Most people think, as Andy Warhol once said, that after her experience with Velvet Underground and the Factory - and after having had sex with most of the rock stars of those years - Nico simply 'became a fat junkie' and disappeared," Nicchiarelli said in a statement obtained by editors at Variety magazine. "But is this how her life really went?"
Before embarking on her music career, the counter-culture icon also had a career as an actress, starring in Federico Fellini's Cannes Film Festival Palme d'Or-winning La Dolce Vita and Warhol's experimental film Chelsea Girls.
The biopic will also focus on her attempts to rekindle her music career with a European tour.
"The entire film is constructed following the inspiration of Nico's music, her performances and the lyrics of her songs," Nicchiarelli added. "It will tell us more than any other dialogue or situation in the film."
Nico's premature death was caused by a cerebral haemorrhage which occurred after she suffered a heart attack while out cycling on the Spanish island of Ibiza.