Donovan will play Billy Flynn alongside Natalie Bassingthwaighte and Casey Donovan.
It will be his first stage musical in Australia; his only other theatre performance here was an MTC production of Festen in 2006.
“My father (Terence) did the role of Billy Flynn in Sydney in 1980 and it was one of the best things I’d seen him do,” Donovan said.
“I’ve never done Chicago. I’ve been offered it a number of times in the UK but I think I’m at a good age to do it.
“My father’s not getting any younger, my daughter, Jemma, has just moved to Melbourne to take up a role in Neighbours so it’s the perfect storm for me to come to Melbourne for the summer.”
Chicago opens at the State Theatre, Arts Centre, on December 14, with tickets on sale now.
Donovan has carved a career in UK theatre with roles in Joseph and the Technicolour Dreamcoat (which he will return to this year), The Rocky Horror Show, Priscilla Queen of the Desert, The Sound of Music and Annie Get Your Gun.
The 51-year-old will move with his wife, Angela, and family to Melbourne for the summer.
Donovan left Neighbours to embark on a singing career 30 years ago, scoring hits including Nothing Can Divide Us, Too Many Broken Hearts and the Kylie Minogue duet Especially For You.
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“I’m certainly going to go out to the Neighbours set and visit Jemma when I’m back, because I haven’t done that since I left,” he said.
“I always get asked about going back on the show — you never know, but at the moment that’s not the plan.
“I’d do it if Guy (Pearce) and Kylie (Minogue) said, ‘Let’s do a couple of days back on Neighbours’. It’d have to be done as a group package for it to have the right sort of feeling.
“But I’m here to support Jemma’s career, not try and upstage her.”
Donovan’s theatre and touring commitments in the UK mean he will not play in the Brisbane and Sydney legs of Chicago, where the Billy Flynn role has yet to be finalised.