Kitsis and Horowitz had been working directly with Muppets Studios vp Debbie McClellan on the project.
This setback comes only a few years after the last attempted Muppets revival, titled The Muppets, lasted just one rocky season on ABC.
There will be Muppets content on Disney+ even without this show; at D23 this summer, the company announced a series of unscripted shorts with the characters called Muppets Now.
Sources say the creative differences arose after producers Muppets Studios recently changed executives.