NEW YORK — Peter Jackson and New Line Cinema have reached agreement to make J.R.R. Tolkien's "The Hobbit," a planned prequel to the blockbuster trilogy "The Lord of the Rings."

Jackson, who directed "Rings," will serve as executive producer for "The Hobbit." A director for the prequel films has yet to be named.

Relations between Jackson and New Line had soured after "Rings," despite a collective worldwide box office gross of nearly $3 billion — an enormous success. The two sides nevertheless were able to reconcile, with Metro-Goldwyn-Mayer Studios (MGM) splitting "The Hobbit" 50/50, spokesmen for both studios said Tuesday.

"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. "We are delighted to continue our journey through Middle Earth."

Two "Hobbit" films are scheduled to be shot simultaneously, similar to how the three "Lord of the Rings" films were made. Production is set to begin in 2009 with a released planned for 2010, with the sequel scheduled for a 2011 release.

Late last year, acrimony between Jackson and New Line became very public, with the studio announcing they would move forward with "The Hobbit" without the Academy Award-winning director. Jackson sued New Line over the amount he was paid for "The Fellowship of the Ring," the first installment of the trilogy.

That litigation, the two sides announced Tuesday, has been settled.

Jackson, who shepherded Tolkien's Middle-earth saga to the screen in a series of three films, won a best-director Oscar for 2003's "The Lord of the Rings: The Return of the King." The trilogy also includes 2002's "The Lord of the Rings: The Two Towers" and 2001's "The Lord of the Rings: The Fellowship of the Ring."

New Line, which is owned by Time Warner Inc., holds the rights to produce "The Hobbit," while MGM, which is owned by a consortium including Sony Corp. and Comcast Corp., has the right to distribute it.