"This will be our first effort to correct the errors of history through a film," Mizushima said in Tokyo.
He said they film would also use testimony from Japanese veterans and archive material.
The director, who is president of Channel Sakura, a right-wing internet broadcaster, said he aims to raise about $2.5 m for the project and participate in international festivals this year.
"Keeping silence to a film like this [Nanking] would allow anti-Japan propaganda to spread around the world as universal knowledge," he said.
The film, supported by conservative members of Japan's parliament and academics, is the latest in a rising tide of mostly book projects trying to debunk the Nanking massacre which Japanese historians say killed 150,000 civilians.
Shinichiro Kumagai, a civil activist studying the massacre in Nanjing, as the city is now called, and supporting Chinese war victims, said the film "will be only spreading shame for Japan".
"The move only reveals their inability to face Japan's wartime past by looking the other way," he said.
Mizushima's documentary will be based on the work of Shudo Higashinakano, a Japanese historian whose work includes two books published in the late 1990s that claim the massacre was a hoax.
Last year, a Chinese court awarded $200,000 in compensation to a survivor of the massacre after ruling against Higashinakano and another historian for claiming she fabricated her account of the atrocity.
Sino-Japanese relations soured over repeated visits by Junichiro Koizumi, the former Japanese prime minister, to the Yasukuni shrine where 14 World War II executed war criminals are honoured among the country's fallen.
Japan's increasingly active nationalist groups have been pushing for references to the Nanjing massacre be removed from public school textbooks.
In a separate development on Thursday, nearly 50 Chinese sued the Japanese government for a 2003 incident in which construction workers broke open a barrel of poison gas left behind by Japanese troops in the second world war.
Forty-three people who were injured and five relatives of one victim who died in the incident want $11.8 million in compensation.
The suit, filed at Tokyo District Court, also demands that Japan cover medical costs and income losses due to health problems blamed on the accident, which happened in Qiqihar city in northeastern China.