I’m going to assume that as Avatar is the highest grossing movie of all time just about everyone has seen it; therefore I am able to talk about spoilers freely. If you haven’t seen Avatar yet then look elsewhere, as spoilers will be written below.
Sigourney Weaver, who plays Dr. Grace Augustine, recently appeared on French TV show “Le Grand Journal” and was asked whether she would be appearing in Avatar 2. Those who saw the film will remember she was shot by Quaritch and attempts to transfer her mind into her Avatar failed. This lead to the wailing spirit lady Na’vi to pronounce her dead at the scene, or in Na’vi terms, “she is with Eywa now”.
In the interview (which you can watch in heavily dubbed French below) Weaver says that her character still exists “in the tree” and director James Cameron has thought of some ideas on how to keep “the family together” (i.e. the main cast). Considering Cameron created Pandora and everything in it he can do just about anything he wants, so bringing Grace Augustine shouldn’t be a problem, especially as her spirit is still hanging with Eywa.
Weaving talks about Avatar 2 around the 3 minute 30 second mark: