The veteran has been working on the passion project for years after receiving the blessing of playwright Arthur Laurents to adapt the project prior to his death in 2011.

She had been developing the film, loosely based on burlesque dancer Gypsy Rose Lee's memoirs, at Universal Pictures, and Downton Abbey creator Julian Fellowes was hired to pen the screenplay in 2012.

John Travolta recently revealed he had discussed the movie with Barbra, who was keen to cast Lady GaGa as lead character Louise, who is modelled after Gypsy herself.

"Barbra (has been) wanting to do Gypsy for years, and she's been developing it, and I think she always visualised Gaga as Louise and maybe me as (her manager) Herbie," he told U.S. news show Extra.

Barbra had even considered portraying Louise's mother, the iconic Momma Rose, in her adaptation, and the latest reports suggest she had signed Legally Blonde's Robert Luketic to direct.

However, she and producer Joel Silver will now have to find another studio to back the musical after Universal chiefs backed out of the project. No reason has been given for the exit, but Warner Bros. executives will continue to serve as co-financiers on the film, reports

Gypsy, featuring lyrics by Stephen Sondheim, premiered on Broadway in 1959, and it is currently enjoying a revival on London's West End, with Imelda Staunton in the role of Momma Rose. The Harry Potter star made her debut in the beloved show last year (14) at England's Chichester Festival Theatre, and she has continued to earn rave reviews following the production's recent transfer to the West End.

Her work in the Chichester Festival Theatre run recently earned her the Best Performance in a Musical prize at the U.K. Theatre Awards, which honour the best stage shows outside of London. Production bosses also claimed the coveted title of Best Musical Production at the ceremony.