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The film followed the true story of American showman PT Barnum, played by Jackman, remembered for promoting celebrated hoaxes and for founding the Barnum & Bailey Circus.
Gracey said after the film’s success, going in for a sequel was an organic step.
“When a movie becomes as big a success as this, it’s only natural there is demand for a sequel. So those discussions have started and we are working on one right now,” the director told The Sun.
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The film, starring Michelle Williams, Zac Efron and Zendaya, scored an Oscar nod last year in the best original song category.
Jackman will also perform the tracks from the musical on a worldwide arena tour of his one-man stage show this year.