The actress - who plays Cora, the Countess of Grantham in the ITV period drama - is to be a guest vocalist for former chart act Big Country.
McGovern, 50, has been gigging for a number of years with her own band Sadie and the Hotheads, who are also set to perform at the festival.
Big Country - whose original singer Stuart Adamson died in 2001 - are in the process of recording their first new album for 13 years.
McGovern said: "I am thrilled to be playing with such a stellar cast of musicians and look forward greatly to performing with Big Country - and, of course, my band Sadie and the Hotheads."
Tony Butler of Big Country - playing for a second successive year - said: "We had a tradition of working with great female vocalists such as Kate Bush and Eddi Reader in the past, so having the opportunity to have Elizabeth perform with us at the IOW is going to be really cool."
Both bands will be performing at the festival on June 23.
Festival promoter John Giddings said: "I have been a fan since Once Upon A Time In America. As soon as I found out that Elizabeth could sing, it was a must to invite her to play at the festival. We will roll out the red carpet for Lady Cora."
Headliners for the festival - tickets for which have gone on sale - include Tom Petty and the Heartbreakers, Pearl Jam and Bruce Springsteen.