"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," del Toro told a "Lord of the Rings" fan website.
"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," he said, noting the film still hadn't been given the green light by MGM, the struggling Hollywood studio.
Matt Dravitzki, a spokesman for "Hobbit" producer and "Lord Of The Rings" director Jackson, said del Toro would not be speaking to reporters Monday.
The announcement by del Toro reflected Jackson and del Toro's "full sentiments at this time," he said.
Del Toro would continue to co-write the screenplays with Jackson and his wife, Fran Walsh, and Philippa Boyens.
Jackson reached a deal in late 2007 to make two films of "The Hobbit." He is serving as joint executive producer with Walsh.
Last week, del Toro, who directed "Pan's Labyrinth," "Blade II" and the two "Hellboy" movies, told journalists the "Hobbit" films, which have been plagued by delays, still hadn't been given the go ahead.
"There cannot be any start dates until the MGM situation gets resolved," del Toro said. "They do hold a considerable portion of the rights."
Reports emerged late last year that MGM was teetering on bankruptcy and del Toro said those issues had caught the "Hobbit" films in a "tangled negotiation."
"We have designed all the creatures. We've designed the sets and the wardrobe. We have done animatics and planned battles sequences ... We are very, very prepared for when it is finally triggered," he said.
Jackson told http://www.TheOneRing.net: "We feel very sad to see Guillermo leave The Hobbit, but he has kept us fully in the loop and we understand how the protracted development time on these two films, due to reasons beyond anyone's control, has compromised his commitment to other long term projects.
"The bottom line is that Guillermo just didn't feel he could commit six years to living in New Zealand, exclusively making these films, when his original commitment was for three years. Guillermo is one of the most remarkable creative spirits I've ever encountered and it has been a complete joy working with him."
He would discuss options for a new director with MGM this week, Jackson told the website.
"We do not anticipate any delay or disruption to ongoing preproduction work," he said.
Last month, Jackson dismissed rumors that the "Hobbit" movies have been delayed by production problems, insisting the project was still in its early stages.
He told Moviefone.com, "Well, it's not really been delayed, because we've never announced the date. I mean it's sort of interesting because the studio has never greenlit The Hobbit, so therefore The Hobbit has never been officially announced as a 'go' project, nor have we ever announced a date."