Cameron was born in 1954 in Kapuskasing, Ontario, Canada, the son of Shirley (nee Lowe), an artist and nurse, and Phillip Cameron, an electrical engineer. His paternal great-great-great-grandfather emigrated from Balquhidder, Scotland, in 1825. Cameron grew up in Chippawa, Ontario, and attended Stamford Collegiate School in Niagara Falls, Ontario. His family moved to Brea, California in 1971, when Cameron was 17 years old.

Cameron expressed interest in the 1912 sinking of the ship RMS Titanic and decided to script and film his next project based on this event. The picture revolved around a fictional romance story between two young lovers from different social classes who meet on board. Before production began, he took dives to the bottom of the Atlantic and shot actual footage of the ship underwater, which he inserted into the final film. Much of the film's dialogue was also written during these dives.  Subsequently, Cameron cast Leonardo DiCaprio, Kate Winslet, Billy Zane, Kathy Bates, Frances Fisher, Gloria Stuart, Bernard Hill, Jonathan Hyde, Victor Garber, Danny Nucci, David Warner, Suzy Amis, and Bill Paxton as the film's principal cast. Cameron's budget for the film reached about $200 million, making it the most expensive movie ever made at the time. Before its release, the film was widely ridiculed for its expense and protracted production schedule.  Released to theaters on December 19, 1997, Titanic grossed less in its first weekend ($28.6 million) than in its second ($35.4 million), an increase of 23.8%. This is unheard of for a widely released film, which is a testament to the movie's appeal. This was especially noteworthy, considering that the film's running time of more than three hours limited the number of showings each theater could schedule. It held the No. 1 spot on the box-office charts for months, eventually grossing a total of $600.8 million in the United States and Canada and more than $1.84 billion worldwide. Titanic became the highest-grossing film of all time, both worldwide and in the United States and Canada, and was also the first film to gross more than $1 billion worldwide. It was the highest-grossing film from 1998 until 2010, when Cameron's 2009 film Avatar surpassed its gross.  The CG visuals surrounding the sinking and destruction of the ship were considered spectacular. Despite criticism during production of the film, it received a record-tying 14 Oscar nominations (tied with All About Eve) at the 1998 Academy Awards. It won 11 Oscars (also tying the record for most Oscar wins with Ben-Hur and later The Lord of the Rings: The Return of the King), including: Best Picture, Best Director, Best Art Direction, Best Cinematography, Best Visual Effects, Best Film Editing, Best Costume Design, Best Sound Mixing, Best Sound Editing, Best Original Dramatic Score, Best Original Song. Upon receiving the Best Director Oscar, Cameron exclaimed, "I'm king of the world!", in reference to one of the main characters' lines from the film. After receiving the Best Picture Oscar along with Jon Landau, Cameron asked for a moment of silence for the 1,500 men, women, and children who died when the ship sank.  In March 2010, Cameron revealed that Titanic would be re-released in 3D in April 2012, to commemorate the 100th anniversary of the sinking of the real ship. On March 27, 2012, Cameron attended the world premiere with Kate Winslet at the Royal Albert Hall in London. Following the re-release, Titanic's domestic total was pushed to $658.6 million and more than $2.18 billion worldwide. It became the second film to gross more than $2 billion worldwide (the first being Avatar).

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