"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 that if the first of the trilogy was a success, then the risk and pressure of filming three movies at once would go away.
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 last night'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 photos.
"It's heartwarming, especially as the hearts of these films live in New Zealand," said Wood.
Bloom, who like most of the international cast attended earlier premieres in London and New York, said: "This beats everywhere man."
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 play on more than 90 screens around New Zealand from today.
Some multiplexes will have up to four prints of the movie, running in adjoining theatres.
In Auckland's Queen Street Village Cinema, the blockbuster opened at midnight and will play around the clock until midnight on 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.
Opotiki in the Eastern Bay of Plenty is having its own gala premiere tonight to celebrate the refurbishing of the De Luxe Theatre's foyer, which has been specially decorated for the occasion.
All 500 seats in the 75-year-old cinema, which has been run by a community trust for the past 20 years, were sold out within days.
- Additional reporting, Vernon Small and Rosaleen Macbrayne
