Radical Entertainment, the Canadian studio behind Prototype and Scarface: The World Is Yours, has closed.
The news was confirmed by various industry figures on Twitter, including the studio's audio designer Rob Bridgett, who tweeted: "RIP Radical Entertainment 1991-2012".
According to Activision, a skeleton team will remain at Radical to support the publisher's "existing projects". However, the team will "cease development" of its own titles.
Up to 90 people are reported to have been laid off.
In a statement provided to Kotaku, Activision said:
"Although we made a substantial investment in the Prototype IP, it did not find a broad commercial audience.
"Radical is a very talented team of developers, however, we have explored various options for the studio, including a potential sale of the business, and have made a difficult conclusion through the consultation process that the only remaining option is a significant reduction in staff.
"As such, some employees will remain working for Radical Entertainment supporting other existing Activision Publishing projects, but the studio will cease development of its own games going forward."
Radical Entertainment was formed in 1991 and acquired by Vivendi Games in 2005. The studio became a wholly-owned subsidiary of Activision following the firm's merger with Vivendi in 2007.
The company developed numerous open world hits, including popular PS2 title The Simpsons: Hit & Run, The Incredible Hulk: Ultimate Destruction, Scarface: The World Is Yours and the Prototype series.
According to NPD data, the studio's most recent game, Prototype 2, was the highest-selling game of April 2012.
The studio was also reported to have been developing a sequel to Scarface, a new Crash Bandicoot title and a game based on Robert Ludlum's The Bourne Identity. All three were rumoured to have been cancelled by Activision.
Activision has closed a string of development studios in recent years.
In 2010, the publisher shut down five of its studios, including Blur developer Bizarre Creations, True Crime developer Luxoflux and Guitar Hero co-dev Budcat. Then, in 2011, it closed DJ/Guitar Hero support dev 7 Studios.