The duo has teamed up with playwright James Graham to create the show, tentatively called "Tammy Faye - A New Musical".
Tammy found fame with her then-husband Jim Bakker in the 1970s as charismatic preachers with their own U.S. TV show, but unlike many evangelists, she embraced the gay community at the height of the AIDS epidemic.
Elton tells Britain's Daily Mail newspaper that her "willingness to preach acceptance" inspired him and his fellow gay star Jake to take on the project, as well as the crossover between televangelism and the entertainment industry.
"We realised that theirs was a real life, rags-to-riches story, played out against the backdrop of evangelism in '80s America," he explains. "The charisma, the persuasion, the unabashed entertainment; the ability of television in America to successfully deliver religion right into the homes of the nation. The explosion of this culture with the ascension of Ronald Reagan to the White House is the perfect backdrop to tell the story of Tammy Faye."
Tammy's televangelism career was hit by scandal, however, following revelations that $287,000 (£225,000) had been diverted from their organisation's accounts and paid to a woman named Jessica Hahn, who had accused Jim of rape. The revelations invited scrutiny of the couple's finances and lavish lifestyle and in 1989, he was sentenced to 45 years in prison for fraud and conspiracy, although it was later reduced to eight. Despite initially standing by her husband, she divorced him in 1992 and married property developer Roe Messner, who was later convicted of bankruptcy fraud.
Elton, Jake and their team hope to bring the musical to the London stage late in 2020. The 72-year-old singer, who has been promoting his "Rocketman" biopic at the Cannes Film Festival, previously had huge success with "Billy Elliot the Musical".