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He has commissioned Australian engineers to build a deep sea submersible which can reach the bottom of the Mariana Trench - 36,000ft (10.9km) down in the western Pacific - after deciding to set the film in the turbulent waters of Pandora, an alien moon.
The vessel will be fitted with 3D cameras designed by Cameron so that he can take unprecedented footage of such depths and, if he wants to, fill it with digitally created monsters for Avatar 2.
The muddy, rocky Mariana Trench, which could swallow Mount Everest, has been visited by man only once.
In May 1960, a submersible called the Trieste took nearly five hours to descend to its floor. Its passengers, Jacques Piccard, a Swiss scientist, and Don Walsh, a US navy lieutenant, were able to spend 20 minutes at the bottom of the world.
In the cold and darkness, eating chocolate bars, they were joined by flounder, sole and shrimp, proving that some vertebrate life can exist at such extraordinary depths.
Although remote-controlled vessels have gone back to the Challenger Deep, a valley at the bottom of the trench, no humans have been so deep again. However, Cameron, who reportedly earned $US350 million ($377.84m) from Avatar, has the money and passion to return.
His obsession with the waters that cover two-thirds of the world’s surface has been manifested not only in his blockbuster Titanic and a spin-off documentary, but also in his 1989 film The Abyss.
Last month, Cameron spent his 56th birthday in a Russian deep sea submersible called the Mir-1, descending more than 1.5km into Lake Baikal in Siberia, the deepest freshwater lake in the world.
Cameron told Russian journalists that he had come to the Siberian lake to draw attention to its pollution problems. He says his descent into the Mariana Trench would be a similar environmental mission.
“We are building a vehicle to do the dive,” he said.
“It’s about half-completed in Australia.”
He hopes to start preparing for the dive later this year.
Australian scientists believed to be working for Cameron have visited the San Francisco headquarters of Hawkes Ocean Technologies, which has been building a submersible capable of settling at the bottom of the trench.
Cameron’s new vessel is expected to be a two-seater, finned cylinder fitted with the latest 3D cameras and a heating system largely missing from the Trieste.
Some of his footage from the depths may end up in Avatar 2 - which is not expected to reach cinemas before 2014 - or possibly in two other deep-sea adventures that the director is considering turning into movies.