The project will be directed by Bad Santa's Terry Zwigoff and produced by American Psycho's Edward Pressman, reports The Wrap.
Cage will play a man who's stuck in a loveless marriage and falls in love with a prostitute.
Terry Zwigoff has co-written the script with Melissa Axelrod.
Pressman recently teamed up with Cage on Werner Herzog's Bad Lieutenant: Port of Call - New Orleans.
"When considering a project, I think it most important that the director and the film live in the same universe and Terry certainly achieves this with Lost Melody," Pressman said.
"I've always wanted to work with Terry and am excited to be teaming on a wonderful darkly-funny drama in the tradition of such classics as The Blue Angel and Sunset Boulevard."
Zwigoff is also known for the cult