About 150 staffers were laid off, Kotaku.com posted Wednesday.
The studio's current projects, "Star Wars: First Assault" and "Star Wars 1313," were canceled, the blog said.
Disney officials indicated the company will still use the LucasArts name to license games, but the studio is history.
"After evaluating our position in the games market, we've decided to shift LucasArts from an internal development to a licensing model, minimizing the company's risk while achieving a broader portfolio of quality Star Wars games," Disney said in a statement. "As a result of this change, we've had layoffs across the organization. We are incredibly appreciative and proud of the talented teams who have been developing our new titles."
LucasArts was part of a $4 billion-plus merger last year when Disney acquired LucasFilm and its sibling company from Lucas.
Astronomers offer more expansive view of universe
LGBT community has 'bullied the American people': Bachmann