Universal and Fox film studios have withdrawn financing from the planned movie based on popular video game Halo, reports US magazine Variety.
Peter Jackson is reported to be an avid fan of Halo
Rumours suggested the studios were concerned the budget could reach £200m, after an original projection of £135m.
The film-makers said the studios pulled out after they and Halo creators Microsoft refused to reduce their deals on the project.
Lord of the Rings director Peter Jackson is an executive producer.
Ken Kamins, who represents Jackson and his partner Fran Walsh, said Microsoft was in talks with other distribution partners.
Preparation work on the film is reportedly continuing at Jackson's and Walsh's Weta production facilities in New Zealand.
The Halo script is by The Beach and 28 Days Later... screenwriter Alex Garland, and due to be directed by first-time feature film-maker Neill Blomkamp.
The video game has a complex mix of mythology, characters and worlds and follows the adventures of futuristic super-soldier Master Chief as he fights to save mankind from an alien race.
It has sold in excess of five million copies around the world since its 2001 release. A sequel followed in 2004, with a third game due out next year.