According to series creator Michel Ancel the popular series will continue. However, it is still awaiting Ubisoft approval.
According to an interview with the creator of Beyond Good and Evil, Michel Ancel, a sequel to the sleeper hit has been in preproduction for the past year. Unfortunately, the small team that has been working on the game thus far has not been given production approval yet by Ubisoft.
Michel Ancel also explained that with this sequel, they intend to progress the story from where it left off at the end of the first game, looking to the future of the planet Hillys. They also intend on continuing to offer a wide variety of gameplay types in the game as well as continuing to create characters that the player can develop an emotional attachment to. There was also some mention of relationships with animals in the game but this was not fully explained by Mr. Ancel.
Thanks to Jonathan Metts for an official translation of the interview.