Cameron hopes to have the sequel in cinemas in December 2014, followed by the third film in the trilogy in December 2015.
James Cameron is to film two sequels to Avatar, the highest grossing Hollywood blockbuster of all time.
The decision means he will not go ahead with tentative plans to film a 3D version of Cleopatra starring Angelina Jolie.
The director will start writing scripts for Avatar 2 and Avatar 3 early next year.
He hopes to have the sequel in cinemas in December 2014, followed by the third film in the trilogy in December 2015.
Avatar, a science fiction epic, grossed $2.8 billion at the box office worldwide following its release last year, and sparked a flurry of other 3D movies.
It tells the story of a battle between humans and 10ft blue-skinned aliens on a distant moon called Pandora.
Cameron said: "It is a rare and remarkable opportunity when a filmmaker gets to build a fantasy world and watch it grow.
"In the second and third films, which will be self-contained stories that also fulfill a greater story arc, we will not back off the throttle of Avatar's visual and emotional horsepower."
In a statement Fox studio bosses Jim Gianopulos and Tom Rothman said: "We had no higher priority, and can feel no greater joy, than enabling Jim to continue and expand his vision of the world of Avatar."