Regular Murphy collaborator Paulson will play Nurse Ratched (portrayed by Louise Fletcher in the 1975 film) in the series, which has been commissioned for an initial run of 18 episodes over two seasons.
Commencing in 1947, the show will follow the nurse's career in mental health care, and her development into the tyrant and bully seen in the original movie.
Murphy also announced further cast members, including Corey Stoll (Ant-Man), Hunter Parrish (Weeds) and Pulp Fiction's Amanda Plummer.
In an Instagram post, he said, "So many of these actors are supremely talented folks who Sarah and I have both longed to work with. … Sarah, Cynthia, Judy, Amanda and Sharon, all doing scenes together? I cannot wait."