Disney is ankling the live action visual f/x business, shuttering the Secret Lab, a unit it formed in 1999 when it folded Dream Quest Images into its Walt Disney Feature Animation group.

Computer-generated work on Spyglass’ “Reign of Fire,” a dragons-rule-the-earth actioner that Disney is distribbing next summer, and the Castle Rock/Warner Bros. comedy “Down and Under,” will likely be Secret Labs’ last before the moniker is retired. Layoffs of hundreds are in the works, with some staffers and resources expected to move on to Disney’s animated features.

“We’re not actively soliciting outside work under the banner of the Secret Lab anymore,” said Thomas Schumacher, prexy of Walt Disney Feature Animation, who has been running the Secret Lab together with Dream Quest Images’ veep and general manager Andrew Millstein. “If the studio comes to me and says here’s a movie that we have a special demand for, then fantastic. But I don’t need to set up a separate company to do that. We’re going to be reassigning our production capabilities. I’ll tailor the people I need for the work I need to get done.”

The entire Feature Animation group, including Secret Lab, employs around 1,700 staffers, with that number expected to be reduced to 1,350, depending on project demands.

Dismantling of the Secret Lab has already begun, with Millstein relocating to Orlando to oversee computer animation and digital efforts at Disney’s Feature Animation facility there. Veteran f/x supervisor and Dream Quest Images co-founder Hoyt Yeatman is expected to remain on board to oversee Disney’s live action f/x needs when its pics go to other f/x houses.

The Mouse House’s move reps yet another inhouse f/x arm that a major studio has shuttered over the years after Warner Bros. and Fox cut ties with or shuttered their own facilities. Only Sony Pictures Imageworks remains.

It’s also a sign of the times — a slow period has hit the f/x world as studios are greenlighting few f/x-filled pics until sometime next spring.

The Secret Lab, based out of Disney Feature Animation’s facility in Burbank, was supposed to provide state-of-the-art CGI character animation and f/x for Disney’s live-action projects, in addition to producing computer-animated features, which recently included work on “Dinosaur.”

Fewer big jobs

Even given its association with Disney, the Secret Lab was being awarded fewer and fewer major films coming out of the studio, including “Pearl Harbor.” Those projects instead went elsewhere, including to rival Industrial Light and Magic.

The shuttering of the Secret Lab is the last nail in the coffin for Dream Quest Images, which was founded in 1979 to become a major player in the f/x biz and won Oscars for its visuals in “The Abyss” and “Total Recall.”

The company had operated as a division of the Walt Disney Co. since 1996, and produced f/x for the studio’s films including “Armageddon,” “The Rock,” “George of the Jungle,” “Flubber,” “Mighty Joe Young” and “Con Air,” among other projects. But work began drying up after “Mission to Mars” and “Inspector Gadget” and Secret Lab saw itself relegated to smaller projects, such as removing spots from puppies in “102 Dalmatians.”

Still Disney is keeping its options open, with the Secret Lab’s live-f/x staffers still available to work on live action pics, should they be needed. A new f/x company could be created just to work on one specific pic, similar to how Warner Bros. has set up Esc. Entertainment to handle f/x for the next two “Matrix” sequels.

“It’s the studio’s job to focus on live action and ask me to deliver what they need for them,” Schumacher said. “But the live action studio was not asking us to deliver live action movies for them and they were not asking us to deliver work for their live action projects. If they want a live action movie, they can come and get it.”