"This is the proudest moment to have Wellington turn out and be part of this," he said.
"This is the real premiere."
Earlier in the day, as he stood on the steps of Parliament, signing autographs and being photographed with tourists and children, he said if the first of the trilogy was a success, then the risk and pressure of filming three movies at once would go away.
Dressed in long black trousers and a purple shirt, rather than his trademark shorts and t-shirt, Jackson said it was now up to New Zealand to take advantage of the profile his film would give to the country's talent and tourist potential.
The other stars of tonight's premiere were Hobbits Elijah Wood (Frodo), Dominic Monaghan (Merry) and Billy Boyd (Pippin) as well as elf Orlando Bloom (Legolas).
Wood revelled in the spotlight, bouncing across the concourse to sign autographs and pose for fans' photos.
"It's heart-warming, especially as the hearts of these films live in New Zealand," said Woods.
Bloom, who like most of the international cast had attended earlier premieres in London and New York said: "This beats everywhere man."
Invited guests included a who-who's of the New Zealand film industry, Australian stars, senior politicians.
Spear-wielding Gondor guards stood sentry on the roof of the Embassy, mounted Ringwraiths loomed menacingly near the entrance, while Hobbit children - complete with hairy prosthetic feet - skipped down the red carpet.
A haka by the Ngati Poneke cultural group was answered in kind by Maori actors Temuera Morrison, Cliff Curtis and Lawrence Makaore, who plays the evil Uruk-Hai Lurtz from beneath several kilograms of latex.
The movie will will be playing on more than 90 screens around New Zealand from tomorrow.
It opens in 65 cinemas. Some of the multi complexes will have up to four prints of the movie, running in adjoining theatres.
In Auckland's Queen Street Village Cinema, the block-buster opens at midnight tonight and will play continuously around the clock until midnight Sunday.
At other Village locations, all the midnight screenings were sold out in advance.
Lord of the Rings was already matching Harry Potter - which broke New Zealand records for the biggest opening movie in its first week - for advance ticket sales.
Tiny Opotiki in the Eastern Bay of Plenty is having its own gala premiere tomorrow night to celebrate the refurbishing of the De Luxe Theatre's foyer, which has been decorated appropriately for the big occasion.
All 500 seats in the 75-year-old cinema, which has been run by a community trust for the last 20 years, were sold out within days.
- Additional reporting, Vernon Small and Rosaleen Macbrayne
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