Freeman is best known for his work in the original British version of the TV comedy "The Office" as well as in the movies "Love Actually" and "The Hitchhiker's Guide to the Galaxy."
The BBC quoted Jackson as saying Freeman was cast because he is "intelligent, funny, surprising and brave -- exactly like Bilbo."
"There are a few times in your career when you come across an actor who you know was born to play a role, but that was the case as soon as I met Martin," Jackson said.
The director also said Richard Armitage, Aidan Turner, Rob Kazinsky and Graham McTavish have landed roles in the "Hobbit" films, which are set before the "Lord of the Rings" trilogy of blockbusters, the BBC reported.
All of the films are based on novels by J.R.R. Tolkien.