Anthony Breznican

When the Mexican writer/director - and just about the hottest film-maker in Hollywood - Guillermo del Toro stares at the monsters under his bed, they stare back into his eyes. "I'm interested in monsters," he says. "Much like angels, they represent a portion of the human soul."

Del Toro is known for making two kinds of movies: artful, gothic, Spanish-language tales, including the Oscar-nominated Pan's Labyrinth and the eerie Devil's Backbone, and colourful English-language popcorn movies such as Mimic, Blade II and 2004's Hellboy. His distinctive creatures and otherworldly parables use the realms of fantasy to explore fundamental issues such as love, alienation, weakness and, of course, fear. Now he has also landed one of Hollywood's most coveted jobs: directing The Hobbit.

Like the Lord of the Rings trilogy, The Hobbit will be produced by Peter Jackson. It tells the story of Frodo's uncle, Bilbo Baggins, and how he first discovers the all-powerful ring and encounters the gruesome Gollum and Smaug the dragon.

Del Toro feels a strong connection with the mythology of J R R Tolkien, who wrote the original books. "If I didn't feel it chime with the universe I'm in, I would do something else," he says. "I have a pretty good record of turning things down. No reason to break that now."

He will be meeting with Jackson soon to hammer out the movie from the novel - and then they'll determine whether there is enough background material in the Lord of the Rings books to create a second movie, which would bridge The Hobbit with the earlier films.

Del Toro will also be writing the first film's screenplay. Jackson, his film-making partner-wife Fran Walsh and their writing partner Philippa Boyens will work on the second. Then they plan to switch and rewrite each other.

Jackson, of course, also directed the first three films. Asked what he will do differently as a director, del Toro says: "Everything. It will be the same landscape but painted by another painter. Then the second movie will evolve into a perfect blending with the trilogy."

Del Toro compares the character of Bilbo to the little girl who was the protagonist of his own Pan's Labyrinth. Both, he says, are innocents trying to maintain their ideals against unspeakable evil. "Bilbo represents a generation of English young men who went to the First World War and saw their souls in danger, if not lost," he says of the novel Tolkien wrote in 1937. "That is a very important theme that I'm attracted to a character with an unerring ethical sense, thrown out into a world full of pride and greed and madness. At the end of the day, there will be a tragic sense of loss, but there will be the survival of that temperament and belief.

"People tend to think that big things only happen to big heroes, that an 11-year-old girl is powerless or a 12-year-old boy is a nincompoop. I think that is not true. The small decisions we make every day define who we are and define the world around us. I'm interested in the essential importance of the small decision. You can be a cashier at a 7-11, or you can be the person at the Kentucky Fried Chicken counter. But I bet you there is a decision every day in your life where you affect somebody else."

Before The Hobbit comes del Toro's new sequel to Hellboy. These films are an allegory about love and loneliness told through a giant devil, played by Ron Perlman, who protects the world by fighting off supernatural evildoers while wishing he could get along better with his human girlfriend (who has superpowers of her own). Hellboy fights for humanity and wants to be a part of it - so much so that he files down his horns. But he often loathes himself as much as the public seem to. He wonders if he has more in common with beasts, ghouls and phantoms.

"In adult movies, monsters can signify many different things," says del Toro. "But in the Hellboy mythology, they symbolise our imperfections and how we can embrace them. If we were more eager and willing to accept otherness, things would be better between people." Quoting Hellboy's sidekick, Abe Sapien, a psychic, blue-skinned fish-man, he adds: "All we freaks have is each other.' That's the story of our lives."

With his husky frame and soft, raspy voice, the 43-year-old resembles a kind of cheerful, Spanish-accented Godfather. Del Toro tends to find more joy than terror in his monsters. He talks of sharing spooky stories with his daughters Mariana, 12, and Marisa, seven, while drawing assorted critters with them, and has fond boyhood memories of clutching his father, just as frightened, while watching Alien in 1979.

His religious grandmother instilled a passion for both the supernatural and separating right from wrong. "It was a lot of Catholic scare about sin and hell," he says. "You're going to be in purgatory if you're not careful, blah, blah, blah - maybe even if you are careful!'".

The original Hellboy movie, which was based on a cult-favourite comic by artist Mike Mignola, earned a healthy but not spectacular $60m, but later developed a strong following on DVD. After del Toro's Academy Award nomination for a Best Foreign Language Film with Pan's Labyrinth, he fought for a sequel, and has plans for a third.

"I'm eager to explore themes that lend themselves easily to metaphor," he says. "The fantastic is the only tool we have nowadays to explain spirituality to a generation that refuses to believe in dogma or religion. Superhero movies create a kind of mythology. Creature movies, horror movies, create at least a belief in something beyond."

He has other projects in the works for when he's finished with Hellboy and The Hobbit, including a reworking of Frankenstein. "Frankenstein's monster is ultimately a very existential creature, thrown into the world by an uncaring creator. It voices the essential plea of mankind asking God, Why am I here?' It's a question mankind has voiced forever."

His new version would be an original tale about Mary Shelley's character. "I would love to do the original - but that is not a movie, that is a mini-series." He has also written a screenplay based on a classic story by cult horror writer H P Lovecraft, At the Mountains of Madness, which involves explorers who find ancient ruins in Antarctica full of monstrous life.

Then there's an original story titled Saturn and the End of Days, which del Toro describes as "a chronicle of the end of the world from the eyes of a seven-year-old. It has many magical and terrible things in it. It's the rapture." He told his elder daughter the outline recently as a bedtime story. "She loved it," he says. "Unfortunately, I was crying at the end. I couldn't help it. But the ones that make me cry are pretty good."