Sir Peter Jackson has confirmed there will be a third film in the Hobbit series.
The director made the announcement on his Facebook page today saying so much of the Hobbit story would remain untold if he didn't take this chance.
"The richness of the story of The Hobbit, as well as some of the related material in the appendices of The Lord of the Rings, allows us to tell the full story of the adventures of Bilbo Baggins and the part he played in the sometimes dangerous, but at all times exciting, history of Middle-earth," he said.
"On behalf of New Line Cinema, Warner Bros. Pictures, Metro-Goldwyn-Mayer, Wingnut Films, and the entire cast and crew of The Hobbit films, I'd like to announce that two films will become three."
The Hobbit: An Unexpected Journey, the first film of the prequel series adapted by director Jackson from J.R. Tolkien's book, is a prelude to his epic fantasy trilogy Lord Of The Rings.
The film is due in New Zealand theatres on December 13 this year; the second, The Hobbit: There and Back Again will follow a year later while the third will come out in 2014.
The Academy Award winning filmmaker said the decision to make the third film was made after he, his wife Fran Walsh and co-writer Philippa Boyens sat down to watch an early cut of it for the first time.
"It is only at the end of a shoot that you finally get the chance to sit down and have a look at the film you have made," he said.
"We were really pleased with the way the story was coming together, in particular the strength of the characters and the cast who have brought them to life.
Fans of the director quickly expressed their pleasure at the announcement and more than 17,000 people have already liked the post.
Thomas Langhorne said: "Much love to you Peter, you've done a wonderful job with the rings trilogy, and I was excited for the two part Hobbit, but a third film to follow, just glorious...Thank you and I cannot wait for December."
President and chief operating officer for New Line Cinema Toby Emmerich has backed Jackson's announcement.
"We completely support Peter and his vision for bringing this grand adventure to the screen over the course of three films," he said.
"Peter, Fran and Philippa's reverence for the material and understanding of these characters ensure an exciting and expanded journey that is bound to please fans around the world."
All three movies are being shot in New Zealand and will be released in 3D and 2D.
"It has been an unexpected journey indeed, and in the words of Professor Tolkien himself, "a tale that grew in the telling," Jackson said.