The 43-year-old filmmaker will move to New Zealand for four years to work with executive producer Peter Jackson and his production teams. Del Toro will direct the two films back-to-back.
The first tells the story of how Bilbo Baggins came to possess the Ring of Doom, while the second will center on the time between then and "The Fellowship of the Ring." New Line did not immediately clarify how the storyline spanning the books would be created.
Del Toro wrote and directed "Pan's Labyrinth," which earned six Oscar nominations in 2006 and won three awards. He is also the director of the upcoming sequel "Hellboy II: The Golden Army," whose monsters bear the unmistakeable surreal vision of the Mexican-born filmmaker.
"I am indeed blessed to become a part of the filmmaking community that Peter, Fran and their extraordinary team of collaborators have created in New Zealand," del Toro said in a statement. "Contributing to the 'Lord of the Rings' legacy is an absolute dream come true."
Jackson and Walsh called del Toro "a cinematic magician who has never lost his childlike sense of wonder."
"We have long admired Guillermo's work and cannot think of a more inspired filmmaker to take the journey back to Middle-Earth," they said in a statement.
Jackson co-wrote, co-produced and directed the "Lord of the Rings" trilogy, which won 17 Oscar and 30 nominations.