Cameron said the movies, with a combined minimum budget of at least NZ$500 million (US$415 million), will be shot back-to-back with each sequel released every 12 months from late 2016.
"It's quite a thrill to officially say that we'll be bringing the Avatar films to New Zealand," Cameron told reporters.
The original "Avatar" was partially shot in New Zealand and its Oscar-winning special effects were created by Wellington's Weta Digital, best known for its work on Kiwi director Peter Jackson's "The Lord of the Rings" and "The Hobbit" trilogies.
Aside from a boosted subsidy that will account for up to 25 percent of the films' budget, Cameron said New Zealand offered skilled production crews and the special effects expertise needed to bring his Avatar vision to life.
"I've worked with crews all over the world, quite a bit in the US and Canada, and you don't have that same spark (there)," he said.
The first "Avatar" was released in 2009 and tells the story of a blue-skinned indigenous species fighting to stop miners exploiting their planet Pandora.
It earned US$2.78 billion worldwide and remains the highest-grossing movie of all time, according to industry website boxofficemojo.com.
"It's a great pleasure for us to recreate that winning combination," said Cameron, who agreed as part of the production deal to advise the government on how to maintain a sustainable film industry.
Prime Minister John Key said securing the sequels was a coup that "will scream out to the world that New Zealand is a great place to make movies".
"We've got to be a lot more as a country than just lamb chops and All Blacks," he said, referring to two of the country's best-known symbols.
"That's what the movie industry does, it demonstrates to the world that there's more to us."
There were fears late last year that New Zealand would lose the deal, with the government reluctant to lift its screen production rebate from 15 to 25 percent to match the sweeteners available in countries such as Britain and Australia.
Key faced criticism in 2010 when he changed New Zealand's industrial relations laws to ensure "The Hobbit" trilogy stayed in the country, a move he said had created about 5,500 jobs.
He denied the "Avatar" deal was another example of Hollywood forcing concessions out of his government, saying "there will always be people who want to look at this as a glass half empty situation".
For all the technical skills available in New Zealand, Cameron said he and 20th Century Fox would have had to look elsewhere if the government had not offered increased subsidies.
"Business sense would have had to prevail and I'm glad that it never came to that," he said.
Cameron -- whose other hits include "Titanic", "Terminator" and "Aliens" -- refused to reveal how much he thought the three films would cost to make but said he hoped it would be less US$1.0 billion.
The Canadian-born director, who owns a rural property just outside Wellington and is in the process of obtaining New Zealand residency with his family, said pre-production work had already begun.
He said the sequels may employ the 48-frame a second technology -- twice the standard rate -- that Jackson used to mixed reviews in "The Hobbit".
"I might just use it in selected scenes, such as when the camera's panning, aerial vistas and that sort of thing," he said.