"Promised Land" will have its international premiere at the annual cinema showcase, although it is scheduled to be launched first in the United States.
According to online reports, "The Bourne Identity" star Damon was originally down to direct the movie tackling the practice of hydraulic fracturing, or "fracking" for shale gas, which has raised concerns over its environmental impact.
The film reunites the actor and film maker after Van Sant directed Damon in the acclaimed 1997 drama "Good Will Hunting".
Damon was nominated for a best actor Academy Award for his performance and won a screenplay Oscar along with co-writer Ben Affleck for a movie that helped launch their Hollywood careers.
Also in the main competition in Berlin is "Gloria", directed by Chilean film maker Sebastian Lelio, Korean entry "Nobody's Daughter Haewon" directed by Hong Sangsoo and Romanian picture "Child's Pose" by Calin Peter Netzer.
There will be a world premiere for "Paradise: Hope", the final installment of Austrian director Ulrich Seidl's Paradise trilogy, while out of competition in Berlin is 3D animation film "The Croods", featuring the voice of Nicolas Cage.
And under the Berlinale Special heading comes documentary "Redemption Impossible".
The 63rd Berlin film festival runs from February 7-17.
(Reporting by Mike Collett-White, editing by Paul Casciato)
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