According to the Los Angeles Times, studio Fox 2000 has exercised its option to have Logan Lerman reprise his role as the titular character in the second entry.
First film Percy Jackson and the Olympians: The Lightning Thief was released last year, taking $89 million domestically and $137 million internationally, but received a lukewarm reception from critics.
In addition to Lerman's return, the studio has also hired Diary of a Wimpy Kid director Thor Freudenthal to helm the film, while The Lightning Thief director Chris Columbus will instead serve as producer.
Back in March, it was reported that Agent Cody Banks scriptwriters Scott Alexander and Larry Karaszewski had been hired to pen the sequel's script.
The new film is likely to be based on author Rick Riordan's second novel in the series The Sea of Monsters.
Percy Jackson and the Olympians: The Sea of Monsters is being targeted for a 2012 release.