"It's true, I'm directing Magic Kingdom, not Iron Man 3. I've had a great run with Marvel and wish them the best," Favreau said via Twitter Tuesday.
A source with knowledge of the situation told EW.com the parting was amicable.
"Magic Kingdom" has been described as a fantasy film about what happens at Disneyland after the park closes.
EW.com said "Iron Man 3" is set for release in 2013, but no replacement director has been selected yet.
Notable deaths of 2014 [PHOTOS]