|Kristen Stewart and Rupert Sanders|
A source told RadarOnline.com: "Liberty let it be known in no uncertain terms that Rupert can't direct the sequel to 'Snow White and the Huntsman.'
"They are trying to work things out after he was caught having an affair, and that is one of the sticking points. She just doesn't want him to ever work with Kristen again.
"Rupert is obviously disappointed because 'Snow White and the Huntsman' was his directorial debut, and he had hoped on building on that with a follow-up after some decent reviews.
"But he knows his actions were inexcusable, and he's going to have to bite the bullet and listen to his wife on this one."
The insider claimed studio Universal are prepared to find a new director as Rupert never signed an official contract and they are determined to keep their lead actress.
The source added: "When Rupert signed up for 'Snow White and the Huntsman,' he didn't know he was going to get a chance to direct a sequel. His contract with Universal was only for one movie. It was a verbal agreement that he was to take the reigns on the sequel, nothing was ever signed.
"Kristen, as the film's lead, will get preference over Rupert and Universal will just find another director."
Kristen and her boyfriend Robert Pattinson are both said to have moved out of their shared Los Angeles home following the actress' cheating confession.
But the estranged couple are now believed to be back in contact with one another.
However, friends say the British actor is not yet ready to forgive his 'Twilight Saga' co-star.
A source said: "'[They] have finally started talking to each other again but it doesn't seem like he is going to forgive her any time soon."