Around 50 staff face redundancy at Crytek Budapest - the studio making Xbox 360-exclusive fantasy title Kingdoms - in the next few weeks, according to an inside source.
The move apparently comes after Microsoft Game Studios asked Crytek to shift development of the game from Hungary to its Frankfurt office in Germany.
According to our tipster, nine staff have already been axed, with "45-50" expected to follow shortly.
The nine who've departed already are said to be "from many disciplines including Level Design, Game Design, QA, IT, Art, Audio."
The source claimed that staffing levels at the Budapest studio will shrink from 80 people to around 30, with Crytek moving its tablet development there.
When contacted by Eurogamer for comment, managing director Avni Yerli said "We can confirm that our Budapest studio is getting a new direction and focus."
Kingdoms was first announced during Microsoft's E3 presentation in 2010. A brief teaser trailer was shown but no real details were offered as to exactly what the game was.
However, our source shed a little more light on what we might expect from the title, suggesting it will feature in Microsoft's 6th June presser at this year's E3.
"Codename: Kingdoms is a first person melee action title with Kinect support. The studio was working on the project for two years. And it's still busy working at the E3 presentation for Microsoft's keynote address. This is one of the main reasons why only nine people got fired so far."
Crytek's last release, FPS sequel Crysis 2, launched on PC, PlayStation 3 and Xbox 360 last month, picking up an 8/10 from Eurogamer's Simon Parkin.