Naz Humphreys attended a casting session in Hamilton, New Zealand, last week and stood in line for three hours only to be told later her skin tone was not suitable.
Video footage from the audition showed the casting manager telling people they were looking for light-skinned people to play Hobbits, the Daily Mail reported citing The Waikato Times.
He tells the would-be Hobbits: "I'm not trying to be... whatever. It's just the brief. You've got to look like a Hobbit."
Humphreys said: "It's 2010 and I still can't believe I'm being discriminated against because I have brown skin. The casting manager basically said they weren't having anybody who wasn't pale-skinned."
The Pakistani-origin woman had hoped for a bit part in "The Hobbit" - a two-part prequel to the Oscar-winning "Lord Of The Rings" series.
She has now set up a Facebook group called "Hire hobbits of all colours! Say no to hobbit racism!"
"I would love to be an extra. But it just seemed like a shame because obviously Hobbits are not brown or black or any other colour. They all look kind of homogenised beige and all derived from the Caucasian gene pool," Humphreys said.
A spokesman for Peter Jackson said he was unaware of the casting restriction and described it as an "incredibly unfortunate error".
"It is not something the producers or the director of 'The Hobbit' were aware of. They would never issue instructions of this kind to the casting crew. All people meeting the age and height requirements are welcome to audition," he said.