Killer Instinct's next entry has reportedly begun development. After Head of Xbox Phil Spencer previously confirmed a few months ago that "it’s about finding the right team and the right opportunity," Nick "Shpeshal Nick" Baker has reported a sequel's now happening.
Speaking on the latest XboxEra podcast, Baker advised Killer Instinct 2 isn't "just 'coming back' it's in active development." However, Baker says he doesn't know which studio has taken this on, leading to speculation that Microsoft could've contracted a third-party studio.
Killer Instinct 2 Has Reportedly Entered Development
Sadly, we don't have much more information right now about this alleged sequel. However, if Xbox were previously having trouble finding the right team, we'd speculate it's in very early development if real. You can watch this segment around 1:25:00.
Originally launched in 1994 for arcades, Killer Instinct switched hands from Rare to Double Helix, who rebooted it as a free-to-play launch title in 2013 on Xbox One. However, Double Helix Games' acquisition by Amazon left Microsoft enlisting Iron Galaxy for later season, and support has since winded down.