The actor explained that director James Cameron has begun work on the sci-fi sequel, and that he has told him the main storyline.
"I spoke to James recently and he told me the story and it's monumental," he told IBN. "It's just a matter of him writing the script, piecing it together and figuring out how to push himself.
"He wants a challenge. And he wants to improve the audience's experience. He's been messing about with 3D and frame rates a lot more."
Sigourney Weaver recently confirmed that she will reprise her role as Dr Grace Augustine in the Pandora-set sequel.
> James Cameron urges BBC to 'muscle in' on 3D
Watch the trailer for Avatar below: