Toy Story 3: According to The Hollywood Reporter, Walt Disney Studios is actively moving ahead with its long-in-discussion sequel to Pixar Animation's two Toy Story movies, a move that could bring Woody, Buzz Lightyear and the gang back to the big screen.

Disney is in the process of setting up a digital animation facility in Glendale, not all that far from DreamWorks Animation's digs, that will be used for the production of Toy Story 3.

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The project falls under the aegis of David Stainton, president of Walt Disney Feature Animation. Andrew Millstein, who headed the company's now-shuttered animation facility in Orlando, also is involved and has begun the process of recruiting animation heavyweights from rival animation studios and effects shops. Although over the past year Disney chairman Michael Eisner and studio head Dick Cook have signaled their determination to embark on a Toy Story sequel, the fact that the studio is now actively beginning that process could make it more difficult for it to resume negotiations with Pixar CEO Steve Jobs to extend Pixar's relationship with Disney.

The current Pixar/Disney deal expires next year with the release of John Lasseter's Cars. While Disney holds the rights to do sequels to Toy Story, it has held off from doing so in the past, in part in deference to Jobs and Lasseter, both of whom haven't wanted to lose control of the characters. Neither Disney nor Pixar would comment.