Hollywood studio funding problems, a possible actors' boycott and ulcer surgery for Jackson have plagued pre-production on the prequel to the Oscar-winning "Lord of the Rings" trilogy.
Jackson posted a news release on his website on Monday saying that cameras started rolling in New Zealand on the much-anticipated $500 million, two-movie project.
British actor Martin Freeman will star as hobbit Bilbo Baggins alongside Elijah Wood, Ian McKellen, Cate Blanchett and Orlando Bloom in twin movies of J.R.R. Tolkien's fantasy novel about a short, hairy-footed hero.
The films are expected to take up to two years to make, with the first timed for release in late 2012.
New Zealand has received a huge boost to its tourism and film-making industries from "The Lord of the Rings" trilogy.