Microsoft's confirmed ACES has been shuttered as part of 1,400 immediate job cuts.
The internal studio was responsible for the Flight Simulator series.
In a statement, Kelda Rericha of Edelman, Microsoft's public relations firm, said that the decision was made within Microsoft's Internal Entertainment Business "to align our people against our highest priorities."
It's not the end for Microsoft flight simulation, however.
"We are committed to the Flight Simulator franchise which has proven to be a successful PC based game for the last 27 years," Rericha added.
"You should expect us to continue to invest in enabling great Live experiences on Windows, including flying games, but we have nothing specific to announce at this time."
The closure was rumoured overnight.