The Clash's Mick Jones, Richard Hawley, Peter Hooton and Paul Heaton are among those recording the Hollies' classic He Ain't Heavy, He's My Brother.
Produced by acclaimed songwriter Guy Chambers, the cover version will be released on 17 December 2012.
Funds raised will go towards the families' legal costs.
"I am deeply honoured to be asked to produce this record for the 96," said Chambers, who is best known for his work with Robbie Williams.
"If we can help to raise money to support the families' legal battle so that they finally get their time in court then our job will be done.
"I spent my teenage years in Liverpool and feel a deep affection for both its musical heritage and the unique solidarity of its people."
The families of the Hillsborough have fought for years for answers The Zutons' Dave McCabe, Pete Wylie of The Mighty Wah!, Gerry Marsden and The Justice Tonight band are among the other artists who will be dedicating their time for free to record the track, which will be joining the challengers for the coveted Christmas number one spot.
All profits from the sale of the CD will go towards assisting the victims' families in their continued fight for justice.
"The families of the 96 should never have been in the position they are now in, of having to fight to get the accidental verdicts from the 1989 inquests overturned," said football legend Kenny Dalglish, who was manager of Liverpool at the time of the disaster, and is backing the campaign.
"I will continue to support their dignified campaign every step of the way."
The Hillsborough Independent Panel spent 18 months looking through more than 450,000 pages of documents relating to the fatal crush at the Hillsborough stadium during Liverpool's FA Cup semi-final match against Nottingham Forest on 15 April 1989.
In a report published in September, it found the lives of 41 of the victims could potentially have been saved if the response of the emergency services had been swifter.