Peter Jackson has confirmed The Hobbit will now be released as a trilogy.
The Oscar-winning director said that after viewing a cut of the first film and part of the second that he felt there was room for a third in his Lord Of The Rings prequel.
Peter said in a statement that a lot of JRR Tolkien's tale of Bilbo Baggins would remain untold if a third film was not made. Warner Bros and MGM will continue their partnership to make the three films.
Sir Ian McKellen broke the news on Twitter. The Lord Of The Rings star, who returns as wizard Gandalf in the films, tweeted: "Two HOBBIT films will become THREE."
The first instalment, The Hobbit: An Unexpected Journey, hits cinemas in December, while the second, The Hobbit: There And Back Again, is set for release in December next year. The third film will come out in the summer of 2014.
Peter said: "We recognised that 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, gave rise to a simple question: do we tell more of the tale?"
"And the answer from our perspective as film-makers and fans was an unreserved 'yes'."
"We know how much of the tale of Bilbo Baggins, the Dwarves of Erebor, the rise of the Necromancer, and the Battle of Dol Guldur would remain untold if we did not fully realise this complex and wonderful adventure."
All three movies are being shot in digital 3D in New Zealand, which is home to Peter's Weta Digital special effects house. Principal photography recently finished on the first two films.