The Bollywood newcomer and Big Boss star will appear in the sequel to the erotic thriller Jism.
Bhatt told The Times of India: "We have done authentic casting in Jism 2. We have taken Sunny Leone because we want a girl who plays that kind of part and persona.
"It is very important that you cast authentically. Everyone talks about out-of-the-box casting but no-one does it.
"The point is that we have decided to attach ourselves with only those who are audacious, be it Sunny Leone or anyone else - people who walk their talk and dare to stick their necks out."
Filmmaker Mahesh Bhatt has said that he chose Leone over established actresses such as Bipasha Basu and Katrina Kaif.
The Indo-Canadian actress will reportedly appear nude under sheets in the main publicity poster for the film.