Microsoft signalled its intent to divest the Seattle-based studio earlier this year.

State of Decay studio Undead Labs has successfully divested from Xbox, but the separation has come at a cost.

Writing on LinkedIn, the company confirmed it is becoming an "independent, employee-owned studio." It also announced that it is laying off a "significant number" of employees.

Although it didn't specify how many roles have been cut, the studio confirmed some of those impacted worked on State of Decay 3.

"It's difficult to reach this moment knowing that not everyone who helped get us here gets to make the rest of the journey with us," reads the statement.

"They are exceptionally talented developers who have poured years into the State of Decay franchise: solving hard problems, looking after one another, and helping shape both this game and this studio. Their work remains part of Undead Labs and part of State of Decay 3, regardless of where their careers take them next.

"There have been far too many announcements like this across the industry, and we hate adding to that list. These are people we'd hire again in a heartbeat, and we hope the industry takes notice."

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The news comes shortly after Microsoft laid off another 268 workers across its video game division , including significant cuts at Halo Studios. Social media posts from impacted employees indicate other studios such as Rare, Treyarch, World's Edge, Activision, and The Coalition have also been targeted.

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