Sir Peter Jackson has confirmed that The Hobbit movie will be split into three, with additional filming for the third film to begin in Wellington next year.
Sir Peter says his desire to tell more of the tale of The Hobbit and elaborate on material in the appendices of The Lord of the Rings made him consider a trilogy.
The decision was made after viewing a cut of the first film, An Unexpected Journey, and part of the second, There and Back Again.
The third, as yet unnamed, movie will be released mid-2014.
More detail of Bilbo Baggins and the dwarves, key battles and the rise of the Necromancer - also known as Lord Sauron in Lord of the Rings - will feature in the $639 million project.
Additional filming for the second and third films is scheduled for next year.
The Wellington Employers Chamber of Commerce says a third Hobbit movie means great things for the capital's economy and exposure.
Policy manager Jeremy Harding says the extra filming and post-production will create more jobs and increase the city's exposure.