Employees working on the free-to-play flight simulation, which was released earlier this year, have either been let go or moved to new positions within the company.
Project Columbia, meanwhile, was an unannounced Kinect title designed to encourage reading.
Both games were being developed at Microsoft's Vancouver studio, which remains active, despite early reports that it had closed.
"Microsoft Studios has decided to end development on Microsoft Flight and Project Columbia," a spokesperson told Gamespot.
"As a result of this action, some positions within the development teams have been eliminated. Microsoft human resources is working with the affected individuals to find new roles within the company.
"Microsoft Studios is invested in British Columbia and still has several teams, both in Vancouver and Victoria, which will continue to produce the best entertainment and gaming experiences possible."
Microsoft Flight was supported with numerous post-release DLC packs, including the recent Alaskan Wilderness pack and Hawaiian Adventure pack DLC, which featured hundreds of miles of Hawaiian islands and 20 new missions.
Watch the launch trailer for Microsoft Flight below: