Unlike Star Wars or any superhero film, James Cameron's Avatar sequels haven't been subject to that same level of rumor-mongering. There have been a few exceptions, mostly involving the production schedule or the number of sequels, and many of those rumors have turned out to be true. But now the first major bit of casting speculation has emerged with Latino Review reporting that Arnold Schwarzenegger is set to play a villain in Avatar 2.
The story says that Schwarzenegger would play a "bad guy human general", probably not too far removed from Stephen Lang's character in the first film. While all of this should be taken with a heavy dose of salt considering the source, the idea of Schwarzenegger reteaming with Cameron for the first time since 1994's True Lies is incredibly exciting. The two worked together on the first two Terminator films, and Schwarzenegger is returning to the franchise as part of 2015's reboot.
It's obvious why Schwarzenegger would be anxious to work with Cameron again. His post-politics film career has left much to be desired. What's less obvious is the benefit for Cameron, who took Avatar to the top of the all-time box office without a single big name star.
What's also unclear is how it would fit into Schwarzenegger's schedule. Cameron recently expanded his Avatar series to three sequels shot back-to-back-to-back in 2014: Avatar 2 written by Josh Friedman; Avatar 3 by Amanda Silver and Rick Jaffa; and Avatar 4 with a script by Shane Salerno. They'll be released each year starting in December 2016, concluding with the prequel Avatar 4 in 2018.
To me this sounds very sketchy, but let's see if something official is announced.