Long before James Cameron shot a frame of Titanic he was working on a movie so ambitious and futuristic that it would be another 14 years before technology caught up with him and he could film it the way he wanted to.

The long-planned and much-hyped £160 million 3D science-fiction extravaganza Avatar will finally be released around the world just before Christmas, 12 years after Titanic, which was 55‑year-old Cameron’s last feature film and remains the biggest box-office hit of all time.

That record could be overtaken by the visually astonishing Avatar, whose ground-breaking techniques and spectacular effects are likely to revolutionise filmmaking and will set standards for years to come.

Cameron, whose filmmaking has always been notable for its technological innovations, explained it simply: “I basically sat down and put everything in this that I ever wanted to see in a movie – and that’s why it’s such a grab-bag of visual concepts.”

With a cup of coffee in hand and looking relaxed and in a pair of jeans and casual shirt, he was talking in his private projection room after screening 30 minutes of Avatar to a small invited group. It is impossible not to be fascinated and enthralled by his action-filled 3D vision of adventure and battles in an iridescent jungle on an alien planet, where hideous, dragon-like creatures appear to leap off the screen, flora and fauna wave in the air and a heroic avatar does battle with a pterodactyl-like beast before subduing it and soaring off on its back.

“It came from all the science-fiction books I read when I was a kid and it just gestated over time,” he said. “I did a lot of fantasy art and I had drawers full of drawings of creatures, characters, robots, spaceships and all that sort of thing. So for me I was just going back to my roots.”

As a teenager Cameron was so astounded at Stanley Kubrick’s 2001: A Space Odyssey that he saw it 10 times and became inspired to experiment with 16mm filmmaking and model-building. From his earliest filmmaking days – he first gained recognition for writing and directing The Terminator in 1984 – he has been a leading science-fiction auteur and special-effects visionary. Aliens, which he wrote and directed, snared seven Oscar nominations but he developed a reputation for making extreme demands on cast and crew; and The Abyss, which won an Oscar for best visual effects, was a notoriously difficult shoot.

While making Titanic he frequently clashed with studio bosses and the film was delayed because of his use of painstaking state-of-the-art special-effects technology. By his own account it was not an easy or pleasurable film to make, but it went on to receive 14 Oscar nominations, winning 11 including best picture and best director.

As Avatar’s star, Cameron chose the up-and-coming Australian actor Sam Worthington as Jake Sully, an ex Marine who has been wounded and paralysed from the waist down. He agrees to travel to Pandora, an Earthlike-planet with a lush rainforest environment, trees a thousand feet tall, floating mountains and an abundance of life forms, some beautiful and some terrifying. There he becomes an avatar, a human-hybrid who falls in love with a Na’vi, a young native woman who is 10ft tall, blue-skinned and played by Zoe Saldana, from Star Trek.

As he becomes increasingly involved with her and her clan he finds himself caught between the military industrial forces of Earth and the Na’vi, who are increasingly threatened by the human expansion on Pandora.

“We’re telling the story of what happens when a technologically superior culture comes into a place with a technologically inferior indigenous culture and there are resources there that they want,” said Cameron. “It never ends well.

“It’s also a love story about an awakening of perception through the other person. That person must teach him something and there has to be a greater reason for him to be in love with her other than she’s a hot blue alien chick.”

The Canadian-born Cameron and his staff have been experimenting for years with seamlessly blending live action footage with computer-generated techniques, including motion-capture CG that can record an actor’s facial ｅxpressions and a virtual camera system that allows Cameron to see in real time the way his actor-based CG characters interact with their virtual worlds.

“It’s fine to say, 'Hey, we did all this unprecedented stuff’, but you have to be willing to go through the painful steps of creating those things and going from an idea to a prototype to a production-ready toolset in a very, very rapid timeframe,” he said. “Avatar was driven by the maturation of the new technology.”

Cameron, who has always used his films as experimental sounding-boards for future projects, explained: “We had taken technology and pushed it a little bit further and got fluid computer-generated creatures on to the screen with The Abyss and we did the same thing again, pushing technology further, with Terminator 2.”

But it was not until he saw how Peter Jackson had created the Gollum character in Lord of the Rings that he felt it would be possible to make Avatar – although, he said: “We were going significantly beyond anything he had done because we had all sorts of different characters based on different actors.”

He went to New Zealand to meet Jackson, toured his special-effects workshop and hired Jackson’s Weta company to work on Avatar.

Cameron explained his methods as he took me on a tour of the offices of his Lightstorm company in an unobtrusive, three-storey building on a busy street in the centre of Santa Monica. It is there, in offices lined with movie posters and rooms containing models of outlandish-looking creatures, that his staff of 60 artists, writers, production assistants and computer experts work on bringing his sometimes impossible‑seeming ideas to the screen.

The first 18 months of the four years he spent working on Avatar were devoted to creating the plants, costumes, vehicles, weapons, and, of course the creatures. one room is filled with models of creatures he and his staff created for Avatar – the Leonopteryx, the Stingbat, the Direhorse, the Sturmbeest, the Hellfire Wasp and many others that didn’t make it into the movie.

The actors had to learn Na’vi, a language that a linguistics professor spent a year creating for the movie, and Worthington, who was previously in Terminator Salvation and will be seen in next year’s Clash of the Titans, spent 13 months rehearsing and filming his scenes. “I’ve never had a guy push me like that,” he recalled later.

Cameron hasn’t yet decided on the exact length of Avatar, although he says: “It’s much shorter than Titanic. Let me put it this way – it’s an epic and a full experience and the only reason it’s not longer is because it’s a 3D experience and we don’t know what people’s threshold is for that, so we’re erring a little bit on the conservative side.”

With plenty of story material left over and the creatures and technology in place it would seem that an Avatar sequel is inevitable, but Cameron is not so sure.

“I honestly don’t know how I feel about a sequel right now. I’d love for us to be successful enough to warrant it, but I don’t know if I actually want to spend another three years making one.”

The filmmaker, who spent a lot of time in deep-diving submarines for Titanic and his documentary Ghosts of the Abyss, added, laughing: “It’s pretty simple. I like to be an explorer and I like to be an artist. I find those two things most fulfilling and after Avatar is done and I’ve hopefully made a little money off it I can go and do some more exploring.”

• 'Avatar’ will be released on Dec 17.