Favreau will be directing Downey Jr. in the film Cowboys & Aliens.
The film is an adaptation of a comic book of the same name by Fred Van Lente and Andrew Foley Rosenberg. The story follows epic enemies of the West, cowboys and Indians, who must unite to fight against extraterrestrials during the 19th century in Arizona.
Ron Howard and Brian Grazer are serving as producers, and production is set to begin in the summer of 2011.
Robert Downey Jr. will star in Sherlock Holmes on December 25, and Iron Man 2 will hit theatres on May 7, 2010.