Steve Pink, who directed 2010 comedy Hot Tub Time Machine, is in talks to helm and rewrite the upcoming sequel, according to Deadline.
Billy Bob Thornton is in talks to reprise his lead role from 2003's Bad Santa, which centred on a cynical conman who posed as Santa in order to rob department stores over the holiday period.
Terry Zwigoff (Ghost World) directed the original film.
A Bad Santa trilogy is reported to be in the works.
Watch the trailer for Bad Santa below: