The Gulliver's Travels actor will tackle the role of Dain Ironfoot and joins Sir Ian McKellen, Elijah Wood and Orlando Bloom in the director's Lord of the Rings prequel.
Jackson tells The Hollywood Reporter, "We could not think of a more fitting actor to play Dain Ironfoot, the staunchest and toughest of Dwarves, than Billy Connelly, the Big Yin himself.
"With Billy stepping into this role, the cast of The Hobbit is now complete. We can't wait to see him on the Battlefield!"
The Hobbit: An Unexpected Journey is scheduled to hit cinemas in December.