New Zealand director Andrew Adamson will serve as a producer and co-writeron the next Narnia film, Prince Caspian, which should be released for Christmas 2007, say Walt Disney Pictures and Walden Media.
Adamson will collaborate with the writers from The Lion, the Witch and the Wardrobe, Christopher Markus and Steve McFeeley.
A screenplay is still being written, but the first film's principal cast will be back, according to the Hollywood Reporter.
The confirmation of the new movie followed a report in the Irish Independent newspaper this week that Ireland was being looked at as a likely location for filming it.
Prince Caspian, published in 1951, was one of a series of seven books written by C.S. Lewis.
The Hollywood Reporter said behind-the-scenes negotiations for the second Narnia movie had been drawn out. The first film has grossed more than US$637.8 million ($941 million) at the box office worldwide.
Outside the US, it ranks as Disney's top-grossing live-action release of all time, surpassing Armageddon and Pirates of the Caribbean.
The movie also received three Oscar nominations this week.
"To me, the most exciting aspect of all of this is that there is so much that Andrew [Adamson] wanted to express and do in the first film, and now he'll have a chance to," Walden Media chief executive Cary Granat said
In the next film, Prince Caspian finds the four Pevensie siblings pulled back into the land of Narnia, where 1000 years have passed since they left.
The child characters will again be enlisted to join the colourful creatures of Narnia, who have been driven into wild, unfriendly parts of the land.
The Pevensies must struggle to overthrow a usurping king named Miraz and restore the rightful heir to the throne, the young Prince Caspian.
Walden Media, which focuses on family-oriented films, is owned by Denver billionaire Philip Anschutz.
Adamson is also working on another sequel, DreamWorks' Shrek 3, the computer-animated franchise on which he got his start as a feature film director. Adamson has helped to develop the Shrek 3 story and will be executive producer.