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The films, planned for release in 2010 and 2011, will be prequels to the Lord of the Rings trilogy directed by New Zealand's Peter Jackson.
"Contributing to the Lord of the Rings legacy is an absolute dream come true," said del Toro, 43.
Jackson will produce the films, to be made back-to-back in New Zealand.
According to studio New Line, the first will be an adaptation of The Hobbit, the novel Tolkien published before his Lord of the Rings cycle.
The second will be an original story focusing on the 60 years between the book and the beginning of the Rings trilogy.
'Magician'
Jackson and his wife and fellow executive producer Fran 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 film-maker to take the journey back to Middle Earth," they said in a statement.
Del Toro's acclaimed fantasy Pan's Labyrinth won three Oscars and three Baftas in 2007.
His latest film, a sequel to his 2004 comic book adaptation Hellboy, is released later this year.
The director's involvement in the Hobbit films has been mooted for some time.
Earlier this month, however, del Toro said nothing was definite "until everything is signed and put on paper".
Sir Ian McKellen has already expressed an interest in reprising his Oscar-nominated role as the wizard Gandalf.
(BBC)
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