The Hobbit has finally been given the greenlight and will be made in 3-D with Sir Peter Jackson in the director's chair.
Shooting will begin in February.
The announcement was made today jointly by New Line Cinema - which bankrolled The Lord of the Rings - and its parent company Warner Bros.
The announcement did not state whether the two part prequel to The Lord of the Rings would be shot in New Zealand.
Members of New Zealand actors' union Equity are refusing to participate in The Hobbit until they meet with its producers. The producers have refused to meet and Jackson has said the film may be forced to be shot in another country.
It had been widely speculated that Jackson would direct after Mexican film-maker Guillermo del Toro quit as director in May due to delays on starting date for The Hobbit, in part due to financial problems with one of its backers, MGM.
There had also been speculation that the two part film would be shot in 3-D.
Both parts wold be made "using the latest camera and stereo technology to create a high quality, comfortable viewing experience", the studios said.
The two part film is expected to cost about US$500 million (NZ$660 m) to make.