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", E! News is reporting.

New Line Cinema and Peter Jackson have made nice in their blood feud over The Lord of the Rings royalties, paving the way for the Oscar-winning filmmaker to oversee an epic version of The Hobbit.

"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."

The filmmaker had even issued a statement saying the ill will would keep him from shooting The Hobbit, the J.R.R. Tolkein adventure about Bilbo Baggins and his ring-discovering, dragon-conquering quest that serves as a launchpad for the LOTR series. And to the chagrin of fans, New Line boss Bob Shaye said he'd find someone else to direct.

It is not clear what specific roles Jackson and Walsh will play. The joint press release simply says the couple, who also produced and co-wrote LOTR, will serve as executive producers of The Hobbit and "manage the production."

Jackson already has his hands full, shooting his adaptation of The Lovely Bones and with Tintin on the docket for next fall, so he apparently won't helm The Hobbit. There's no word on who will adapt The Hobbit, which will be divided into two parts for the big screen.

All is well in the shire and the first film is slated for 2010 and its sequel in theaters the following year.

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