The idea for this sequel was originally shelved due to poor sales. The hopes of the sequel was merely in rumor in early 2006 and late 2007 before becoming a reality in May 2008 when Ubisoft showed the "The Pig" teaser without a major introduction or naming the game. Up to this date (late 2010) there has been no official name been stated.
Unlike the first game, Ubisoft has given Michel Ancel's team more freedom. In other words, the development team has the opportunity to make the game however they want it to be.
Rumors about a sequel resurfaced in November 2007 when Michael Ancel talked about the secret project he was working on that "means a lot" to him. When the interviewer asked about the creation of Jade, the main protagonist of Beyond Good & Evil, Michael Ancel told him, that he hopes that Jade will "keep her values and her personality" - hinting that a sequel is in the works.
In 2017, a new trailer was released and the game is confirmed as a prequel instead of a sequel.
Two weeks prior to the teaser release at Ubidays 2008 in May, the French magazine Jeux Vidéo Magazine interviewed Michael Ancel. He told the magazine, that BG&E2 had been in pre-production for a year, marking beginning of pre-production approx. somewhere between March and June 2007.