Guillermo del Toro, director of “Pan’s Labyrinth” and the man slated to helm the adaptation of J. R. R. Tolkien’s famous novel, “The Hobbit,” has announced that he is leaving the project.

“In light of ongoing delays in the setting of a start date for filming ‘The Hobbit,’ I am faced with the hardest decision of my life,” the director wrote on “Lord of the Rings” fansite TheOneRing.net. “After nearly two years of living, breathing and designing a world as rich as Tolkien’s Middle Earth, I must, with great regret, take leave from helming these wonderful pictures.”

The project, which would likely have been an epic two-film adaptation of the story of Bilbo, a young Hobbit who finds himself at the center of a grand adventure involving dwarves, wizards, goblins, dragons and a powerful ring, has been met with an uncertain future in the wake of MGM’s financial woes.  Producers have been eager to set a date to begin shooting as early as this summer, but a presumed deal involving the sale of MGM, which holds a large portion of the rights to the story,  has yet to materialize leaving production in limbo.

“There cannot be any start dates until the MGM situation gets resolved because they do hold a considerable portion of the rights and it’s impossible to make a unilateral decision by New Line or Warner,” he reportedly said last week while promoting an upcoming horror movie he’s producing. “We really believe that dates will be known after the fact of MGM’s fate…We’ve been caught in a very tangled negotiation.”

Although problems at MGM have delayed the project and led to del Toro’s decision to step down as director, insiders at New Line say the first movie will meet its target release date regardless whether or not a MGM deal is made.

Despite relinquishing his directing post del Toro said he would continue to co-write the screenplays with Peter Jackson, Fran Walsh and Phillippa Boyens.