The development studio recently released Prototype 2, with Activision citing the game's poor sales as the reason for the studio's closure.
"Although we made a substantial investment in the Prototype IP, it did not find a broad commercial audience," Activision said.
"Radical is a very talented team of developers, however, we have explored various options for the studio, including a potential sale of the business, and have made a difficult conclusion through the consultation process that the only remaining option is a significant reduction in staff.
"As such, some employees will remain working for Radical Entertainment supporting other existing Activision Publishing projects, but the studio will cease development of its own games going forward."
The news may come as a surprise to some, after Prototype 2 took the top spot on sales charts the week of its release.
The studio made its own statement in which it thanked its fans and confirmed that Prototype 2 is still on schedule to release on PC in July.
"Hi everyone. Yes, there's some unfortunate news to share today. This morning, Radical Entertainment went through a significant reduction in staff," Radical Entertainment posted on its Facebook page.
"We're very proud of what we achieved with the Prototype franchise, but unfortunately, the Blacklight virus didn't spread as far as it could. For PC gamers, rest assured that the PC version of Prototype 2 is still going to launch on July 24th as planned.
"And a special 'thanks' to the Prototype Army and all our extremely loyal and passionate fans for supporting Radical Entertainment. We couldn't have come this far without you."
Radical Entertainment was formed in 1991, and developed games ranging from Mario is Missing to Incredible Hulk: Ultimate Destruction.
> Digital Spy reviews Prototype 2
Watch the trailer for Prototype 2 below: