The Conservation Department has permitted filming in protected areas, but has imposed 77 conditions in a 40-page document, and slapped on a $50,000 bond. During the next two months, action sequences in the $360 million trilogy will be filmed in the Mount Owen area near Murchison, the Wakatipu basin near Queenstown, around Te Anau, and in Fiordland.
Filming will be based around the hobbits as they trudge across the Middle World on their mission.
But film company Three Foot Six's access is restricted. It has to maintain public access to the areas and drive only on the roads. It will also pay for a DOC officer to monitor how well it protects the environment.
Publicity officer Clair Raskind said 400 people would be in the shoot starting next week around Queenstown.
Up to 300 horses and riders would be auditioned for one scene, she said.
"We're doing all the action and the most dramatic scenes."
However, the set will stay under wraps for now.
Lord of the Rings producer Tim Sanders said it was a relief the application had been approved.
"Some of New Zealand's most beautiful places will be showcased internationally through this film trilogy," he said.