As a lengthy dispute over financial issues wrapped up between "Lord of the Rings" trilogy director Peter Jackson and New Line Cinema, the studio agreed to make two movies based on J.R.R. Tolkien’s books "The Hobbit," which will be produced by Jackson.

"We resolved all the issues between us,'' said Michael Lynne, co-Chief Executive Officer of New Line in an interview. “The slate is wiped clean so we can move forward.''

The only thing stopping Jackson to proceed with the making of the "Hobbit" movies was the dispute he and New Line Cinema were embroiled in over income generated by the first film in the LOTR trilogy.

No action regarding future movies could be taken while the trial was still ongoing. Now that it’s all over, Jackson announced he’s "delighted to continue our journey through Middle Earth."

"I'm very pleased that we've been able to put our differences behind us, so that we may begin a new chapter with our old friends at New Line," Jackson said in a statement Tuesday. "We are delighted to continue our journey through Middle Earth."

Metro-Goldwyn-Mayer Studios Inc. will help finance and distribute the films, New Line said today in a statement. Jackson will produce the movies alongside his on- and offscreen partner, screenwriter Fran Walsh.

No director for the two flicks, both prequels to the LOTR trilogy, has been named yet, but it is already known they will be shot simultaneously in New Zealand for a release set in 2010 and 2011. According to industry experts, the films are estimated to cost $150 million to $200 million each, based in part on the $400 million cost of the first three and inflation.

MGM Chairman Harry Sloan, who was credited by all parties for bringing about the deal, said Jackson found it "impossible" to direct the films and be reading in time due to other projects, including "The Lovely Bones," and the Tintin trilogy, which was recently announced he will be directing.

"He can't get it scheduled and he doesn't want the fans to have to wait for the next two movies," Sloan said, adding that the studios might postpone the films if Jackson changed his mind.

"Peter Jackson has proven himself as the filmmaker who can bring the extraordinary imagination of Tolkien to life and we full heartedly agree with the fans worldwide who know he should be making The Hobbit," Sloan added.

Actors such as Ian McKellen, who was honored with an Oscar for his performance as Gandalf in the LOTR trilogy, already expressed his willingness to be part of the Hobbit projects.

Jackson's three-part adaptation of Tolkien's "The Lord of the Rings" made history when its final installment "The Return of the King" won 11 Academy Awards in 2004, including the best picture, and best director Oscars, becoming the first fantasy movie to ever win the best picture award. The trilogy drew in tremendous revenues for the studio, of over $3 billion worldwide.

In 2005, Jackson and Walsh sued New Line Cinema in claiming they were shortchanged in profit participation on "The Fellowship of the Ring," sparking an angry retort from Bob Shaye, the founder and co-chairman of New Line, who told a magazine: "I don't care about Peter Jackson anymore."

However, it seems that over the past several months, since a judge fined New Line for withholding information in the lawsuit, things changed radically and MGM helped bring Jackson and the studio together to resolve their issues and come to terms on the new agreement, which were not disclosed.

"We are very pleased we have been able to resolve our differences, and that Peter and Fran will be actively and creatively involved with The Hobbit," Shaye said. "We know they will bring the same passion, care and talent to these films that they so ably accomplished with The Lord of the Rings."