Downton Abbey and Cinderella actress James takes on the role of a young Donna, played by Streep in the original movie, which was a hit when it was released almost 10 years ago.
The new film, opening in July next year, "goes back and forth in time to show how relationships forged in the past resonate in the present".
Streep returns as Donna, Walters as Rosie and Christine Baranski as Tanya in the musical comedy, set on the Greek island of Kalokairi and based on Abba songs.
Seyfried and Dominic Cooper reunite as Sophie and Sky, with Pierce Brosnan and Stellan Skarsgard from Mamma Mia! The Movie also on screen again.
Ol Parker, who penned The Best Exotic Marigold Hotel, writes and directs the sequel, while Abba's Benny Andersson and Bjorn Ulvaeus return to provide music and lyrics.
Mamma Mia! Here We Go Again is released in UK cinemas on July 20.