I haven’t seen Avatar yet, so I don’t know if it’s spelled out why the atmosphere is unbreathable to humans. The simplest and easiest reason I can think of is if the atmosphere had too much CO2. 10% CO2 would leave humans hyperventilating until they died.
However I don’t know if this would be plausible or not. A high CO2 atmosphere would strongly effect the geochemistry of the planet. In particular, it would mean the very rain would be soda water. Not a strong acid but an acid to be sure. Maybe life there could have evolved to tolerate an acidic environment, but it’s a stretch. More importantly, in a geologically short period of time either most of the CO2 would be scrubbed from the atmosphere or else the crust of the planet would consist almost entirely of carbonate minerals like limestane. So does the high-CO2 idea fail?