Yoram Honig of the Jerusalem Film Fund and a publicist for the film said Wednesday that Portman wrote the screenplay and will also star in the movie as Oz's troubled mother.
The publicist spoke on condition of anonymity to discuss the project.
"She (Portman) read 'A Tale of Love and Darkness' and asked me for the rights to make a film adaptation around five or six years ago," Oz told Reuters by telephone.
"I agreed because of my high esteem for her work. She's an excellent actor."
They say Portman is to arrive in Israel in September or October to cast local actors. The movie will be filmed in Jerusalem in early 2014.
It's not decided if the film will be shot in Hebrew or English. Honig's fund is providing $400,000.
The movie is based on Oz's 2002 autobiography, "A Tale of Love and Darkness," about his youth during Israel's founding years. It recounts Oz's childhood in war-torn Jerusalem in the 1940s and 1950s, his mother's death and his journey through a kibbutz and Israel's shifting politics after the birth of the nation.
Oz said that he has been helping prepare the script.
Portman's publicist was not immediately available to comment.
Portman, 32, was born in Jerusalem to an Israeli father and an American mother, but was raised in the United States. Her first feature film role was 1994 thriller "Léon: The Professional" and her breakout role came in her teens as Queen Padmé Amidala in "Star Wars: Episode I - The Phantom Menace."
Apart from her Hollywood career, the Harvard-educated, Hebrew-speaking actress has also worked in Israeli film.
The Associated Press and Reuters contributed to this report