UPDATE: 12/14/10 5:30 PM PST Director Jon Favreau confirmed the news through his Twitter account. Here is what he tweeted:

"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."

We'll keep you posted on Marvel's search for an Iron Man 3 director as soon as we have more information.

Vulture reports that Iron Man and Iron Man 2 director Jon Favreau will not direct Iron Man 3.

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It seems that Favreau became frustrated with Marvel's intentions for the sequel, where they want to add more of their own superheroes into the third Tony Stark movie. In fact, we reported just last week on Iron Man 3 and it seemed that the director was unclear with how the story will unfold at this point:

"This whole world... I have no idea what it is. I don't think they do either, from conversations I've had with those guys."

It is also speculated that Jon Favreau is getting too pricey for the frugal Marvel Studios, which is controlled by Disney. Favreau's price could reach upwards of $15 million for Iron Man 3, plus 15% of the total gross. It was theorized that Marvel could be pitching this version of Iron Man 3 to force Jon Favreau off the project. Also complicating matters is star Robert Downey Jr. who has directorial approval provisions in his contract.

Marvel allegedly started the search for a new Iron Man 3 director last night. Of course, none of this has been confirmed by Marvel Studios or Jon Favreau at this point, although we'll be sure to keep you posted with any further details regarding Iron Man 3 as soon as we have more information.