Double Fine Productions has laid off 23 employees — roughly a quarter of its workforce — as the studio transitions back to being an independent company after parting ways with Xbox.

Studio head Tim Schafer announced the cuts in a post on Double Fine's official Bluesky account at 12:01 PM on July 28, 2026. He attributed the layoffs to the studio's move to independence and "the need to reach a size the studio can sustain," according to Eurogamer. Before the layoffs, Double Fine had approximately 90 employees, per Bloomberg reporter Jason Schreier.

The 23 roles eliminated represent a 25% reduction of the studio's headcount, as reported by GamesIndustry.biz. An Xbox spokesperson confirmed that Double Fine returned to independent management, retaining its intellectual property, its catalogue of existing games, and runway — funding to continue development — for its next projects.

Double Fine is best known for titles such as Psychonauts and Psychonauts 2, story-driven platformers celebrated for their inventive art direction and writing. Microsoft acquired the studio in 2019 as part of a broader Xbox push to expand its first-party lineup — games developed and published by the platform holder itself.

The split from Xbox follows a wider restructuring at Microsoft's gaming division. On July 6, 2026, Eurogamer reported that Microsoft announced 3,200 layoffs across its Xbox division. Double Fine was one of four Xbox game studios removed from Microsoft's roster in that restructuring, alongside Compulsion Games and Ninja Theory. Double Fine regained its independence in the week prior to the layoff announcement, according to Eurogamer.

For the 23 employees affected, the return to independence comes at a personal cost. For the studio, it is a question of what a smaller, self-owned Double Fine can fund and ship on its own. Schafer did not specify what the studio's next project will be, and the spokesperson's reference to "runway" suggests funding is in place for now but not indefinite.

The games industry has seen a wave of layoffs and studio closures through 2025 and 2026, affecting publishers large and small. Double Fine's situation is distinctive: not a closure, not an acquisition, but a studio cutting itself free from a corporate parent and shrinking to fit the budget that independence requires.