The pair recently teamed up for Bad Lieutenant: Port Of Call - New Orleans, which sees Cage play a cop who, in the aftermath of Hurricane Katrina, slips into the abyss as his drug habit takes precedence over a murder investigation.
The 46-year-old said Herzog's arthouse collaborations with the late star Klaus Kinski drove him to work with the acclaimed director.
"I wanted to see if I could have that relationship, in a positive way as opposed to a negative way, that Werner had with Kinski," he told The Guardian.
For the thematic update of the 1992 Abel Ferrara movie, Cage said he spoke with counsellors and addicts so that his portrayal was realistic and did not glamorise drugs.
"I wanted Terence to be kinda hard to watch at times, and my face would get screwed up at times from the grimaces from the coke and from the, the, whatever else he was putting in his body, and the exhaustion from lack of sleep.
"So it was important for me that he became almost grotesque, like a modern but degenerated Richard III of New Orleans, the twist in his back, was just trying to call up a little bit of Richard III."
Cage, who addressed alcoholism in his Oscar-winning role in Leaving Las Vegas, said his latest turn was a "huge challenge", adding: "I didn't know that I could do it."
Bad Lieutenant: Port Of Call - New Orleans, which also stars Val Kilmer, Eva Mendes and Xzibit is out on Friday.