Cameron announced the production with Cirque president and CEO Daniel Lamarre at the C2MTL-Commerce and Creativity Conference in Montreal on Thursday.
The globally touring show is to debut in late 2015, ahead of Cameron's three planned "Avatar" sequels, the first of which is slated to hit theaters in December 2016. Cameron is in pre-production on the follow-up films and has said he intends to shoot them concurrently in New Zealand.
Twentieth Century Fox, which is financing and distributing the "Avatar" movies, is also partnering on the show, as is Jon Landau's Lightstorm Entertainment.
The "Avatar" production marks the first time Cirque du Soleil has done a show based on a movie, but it's not the first time the troupe has worked with Cameron, who produced the 2012 3-D performance documentary "Cirque du Soleil: Worlds Away" and occasionally joined the crew as a camera operator.
"Over the years, I have discovered the extraordinary talents and imaginations of both the artists and the creative forces behind Cirque du Soleil," Cameron said in a statement. "I know we share the common goal of bringing audiences to another level of entertainment experiences. I look forward to doing just that on this project."
The original "Avatar" took in more than $2.7 billion at the worldwide box office and remains the highest-grossing movie of all time.