It has taken longer than Bilbo's lonely trek with The One Ring; it has been a battle as ferocious as that with the dragon Smaug.

But today - finally - Sir Peter Jackson begins a worldwide casting call for actors on The Hobbit after the troubled $661 million two-part movie series belatedly got the green light from its US film studios.

Shooting for the 3D picture begins in February - but New Zealand's place as home to Middle-Earth remains uncertain as the dispute between the Actors Equity union and the show's producers rumbles on.

British actor Martin Freeman is a hot tip to play the lead character of Bilbo Baggins.

Matt Dravitzki, Jackson's spokesman at Wingnut Films, said an announcement on where filming takes place would be "probably a week or two away". But the Waikato town of Matamata, which became affectionately known as Hobbiton, was abuzz with talk that filming would go ahead in New Zealand, after repeated setbacks.

Russell Alexander, who operates the Hobbiton Movie Set and Farm Tour, said he was thrilled to hear about the film being given the go-ahead.

"That's really exciting if it's true," he said. "But I haven't heard anything official."

Matamata-Piako mayor Hugh Vercoe added: "We've always believed that the films would be made here.

"The film-makers have gone to a lot of trouble to get the set ready and it is looking fantastic. We are the original Hobbiton - this is where everyone wants the filming to take place."

After months of uncertainty, during which time original director Guillermo del Toro quit, yesterday New Line Cinema, its parent company Warner Bros and MGM jointly announced that filming would go ahead.

In a statement, Jackson said: "Exploring Tolkien's Middle-earth goes way beyond a normal film-making experience. It's an all-immersive journey into a very special place of imagination, beauty and drama."

Warner Bros president Alan Horn said: "There is no human on the planet as qualified as Peter Jackson to direct these films."

Actors Equity members have refused to participate in The Hobbit until they meet producers, including Jackson. Economic Development Minister Gerry Brownlee is trying to negotiate a rapprochement between the actors and producers to ensure the production isn't lost overseas.

They have agreed to work together to "update the conditions of engagement for performers in the New Zealand screen production industry".