Accoring to Variety, Since Elf grossed a surprising $220 million worldwide, a sequel has seemed inevitable, and many in town have been buzzing recently that it was finally set to move ahead.

However, New Line is still in negotiations to sign what's likely to be a very lucrative deal for Will Ferrell to star in Elf 2.

The studio is already thinking about next steps but won't progress with any other elements until it closes with the much-in-demand star.

"We're only going to make this if it's with Will," confirmed New Line production prexy Toby Emmerich.

The pact for Ferrell is expected to included a guaranteed $20 million-plus against gross points.

Still up in the air is who will direct the pic. Original's helmer Jon Favreau has the right to look at a script first, but insiders say it's unsure whether he'll end up behind the camera for a sequel.

Studio apparently has a list of other directors who may take the helm if Favreau doesn't end up in the head chair. It includes several of the top comedy directors and one surprising name: New Line exec veep of production Kent Alterman, who's reportedly a favorite of Ferrell's.

First step after signing Ferrell, though, will be writing a script. Scott Armstrong, who did uncredited work on the first Elf and co-wrote Ferrell starrer Old School, is expected to be tapped as the scribe for Elf 2.