Mischa Barton will take the lead role in the film
A remake of Alice in Wonderland - called Malice in Sunderland - will not be filmed on Wearside.
The film was due to be shot in the area but a £250,000 funding shortfall forced the picture's bosses to look elsewhere.
The region's film group said it had to spend money on local talent. It will now be filmed in Southend and retitled - Malice in Wonderland.
Hollywood actress Mischa Barton is to star in the picture, described as a new take on Lewis Carroll's classic tale.
Albert Martinez-Martin, producer at Future Films, said: "There is no problem with Sunderland at all, the reasons being we have been looking at locations which are offering help in terms of funding.
"There is about £250,000 which we have lined up from Screen East in Southend and we are looking at locations there right now.
"The title was also changed as everyone in the UK would know Sunderland but outside UK they wouldn't. I also thought two puns in one title were one too many."
The film's star Barton, best known for her role in US teen soap The OC, is lined up to play a US student who, having been hit by a London taxi, finds herself disoriented in a strange city.
Tom Harvey, chief executive of Northern Film and Media, said: "I think it is very sad it can't shoot in the North East.
"We have over a £1m to spend but that goes on local people. In this region talent that lives and works here is more important than productions companies coming in."
The film is to be directed by British newcomer Simon Fellows.