While Lionhead's Peter Molyneux seems to be working on Fable III, he also mentioned that his studio is working on a non-Fable game which he hopes to show at E3.
"Lionhead shouldn't be thought of as just doing Fable," he said. "Definitely not. In fact we've been working on, working incredibly hard, on something else. We haven't been allowed to talk about that something else because the rule is we have to have something to show, to prove it. Those days of high media concept are gone now and quite rightfully so."