The film, which will be filled with special effects, has been three years in preparation. One Tolkien website showed more than 2,000 comments from fans about the casting alone
The New Zealand director, Peter Jackson, has cast Sir Ian McKellen as Gandalf the wizard, Ian Holm as Bilbo Baggins and Elijah Wood as Frodo Baggins. Cate Blanchett is Galadriel, the elf queen, and Live Tyler will be Arwen, an elf warrior and princess.
All three of the films are being made back to back in New Zealand, beginning with the first instalment, "Part One: The Fellowship of the Ring". Filming is expected to take at least 18 months and the first film is expected in cinemas by Christmas 2001.
"The Lord of the Rings is among the greatest adventures ever written and making this film is proving to be a wonderful adventure in its own right," said Michael DeLuca, president of New Line Productions, which is putting up the money. "Like Frodo, the hero of this saga, we're on a film quest."
Mr Jackson, who directed Kate Winslet in Heavenly Creatures, believes he is up to the task. "My team and I have poured our hearts into the project for the past three years so it's a great thrill to begin actual photography," he said.
"Filming three films at once has never been done before, in addition to which the project features thrilling special effects, so it was essential to plan everything down to the last detail. We owe Prof Tolkien and his fans our best efforts to make these films with the integrity they deserve."
With sweeping battle scenes populated by thousands of computer generated extras, Mr Jackson added: "It's veering towards 'Braveheart' rather than a whimsical fairy tale."