Watson, 20, is working on the 'Pure Threads' collection meant for "sensitive people, who want to be supportive of these kind of issues," the New York Post quoted Ferretti as telling WWD.
The designer said she was attracted to Watson because of her "freshness...spontaneity and simplicity."
"She is intelligent, with a strong personality, a young, modern girl," she said of the actress.
This is not Watson's first foray into the world of fashion; she modelled for Burberry's Autumn/Winter campaign in 2009 and appeared in their 2010 Spring/Summer campaign alongside her brother, Alex.
The British actress also began working as a creative adviser for People Tree, a fair trade fashion brand, in February 2010. Part of the proceeds of her Ferretti line will benefit People Tree.
"I'm pleased that a luxury brand such as Alberta Ferretti has decided to create ecological clothes," Watson said in a statement about her latest venture.
"I believe this is a big step forward for all of the international fashion industry, but also an important step for an increased sensitivity to the problem of ecology," she added.
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