In a letter posted Tuesday on Theonering.com., Jackson and partner Fran Walsh said an executive from New Line Cinema had called to tell them the studio was moving ahead with "The Hobbit" without him.
"Last week, Mark Ordesky called Ken (Kamins, Jackson's manager) and told him that New Line would no longer be requiring our services on 'The Hobbit' and the LOTR 'prequel,' " the 45year-old New Zealand director wrote.
"This was a courtesy call to let us know that the studio was now actively looking to hire another filmmaker for both projects," he said.
New Line Cinema holds the rights to produce "The Hobbit" and Metro-Goldwyn-Meyer has the rights to distribute it.
Jackson, who shepherded Tolkien's Middle-earth saga to the screen in a series of three films, won a best-director Oscar for 2003's "The Lord of the Rings: The Return of the King." The trilogy also includes 2002's "The Lord of the Rings: The Two Towers" and 2001's "The Lord of the Rings: The Fellowship of the Ring."
A spokesman for Wingnut Films, Jackson's production company in Wellington, who spoke on his standard condition that he not be named, confirmed Wednesday the letter was genuine.
The announcement came amid an ongoing dispute between Wingnut Films and New Line Cinema over the amount Jackson was paid for "The Fellowship of the Ring," including DVD payments.
While Jackson hasn't said how much he believes he was underpaid, The New York Times last year quoted his lawyers as saying it was as much as $100 million. He is suing New Line Cinema over the shortfall.
The Dominion Post newspaper quoted Jackson as saying that because he and Walsh didn't want to discuss upcoming movies "until the lawsuit is resolved, the studio is going to have to hire another director."
"We are very sorry our involvement with 'The Hobbit' has ended this way," the pair added.
Plans for Jackson to make a $128 million movie version of the sci-fi video game "Halo" were also scrapped this month after backers 20th Century Fox and Universal Pictures pulled out.
Jackson's "Lord of the Rings" trilogy grossed nearly $3 billion at box offices worldwide.