The actor was due to have a starring role in director Mike Donahue's horror movie, but a source told TMZ that Busey was dismissed after shooting only half of his scenes.
Busey was apparently uncooperative on various occasions throughout the production, but was sacked only after making an improper remark to a female staffer.
The Celebrity Apprentice star's rep confirmed to the website that Busey is no longer involved with Mansion of Blood, but played down any suggestion that Busey acted inappropriately.
"The situation was plagued by contractual issues and misunderstandings from the outset. Gary considers this episode concluded and has no further comment on the matter," the spokesperson said.
Busey's remaining scenes have been rewritten to accommodate a new actor.
The Oscar-nominated star has roles in several other projects lined up, including Piranha 3DD and the comedy Slow Moses.
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