Valve CEO Gabe Newell confirmed the development of a new Source engine at a Q&A event with /v/ 4chan forum members.
"We've been working on engine stuff for a while. We've just been waiting for a game to roll it out with."
He adds that Source 2 is not just an extension to the existing engine, but rather a new development tool from the ground-up. While Newell was candid about Source, he declined to answer questions about Half Life 3, the company's eagerly anticipated sequel to its flagship franchise.
The CEO's confession backs up a discovery by code junkies at Valvetime.net, who discovered lines of code in Valve's Source filmmaker program that reference the next-gen engine.
Valve has been busy as of late, introducing Steam's Big Picture Mode, which brings PC gaming into the living room and utilizes a sleek user interface fit for large HDTVs.
While Half Life 3 news has been sparse, back in September the French gaming site Jounaldugamer reported that a person "close to Valve has confirmed that the development of Half-Life 3 is well under way, although much work remains. According to her, Half-Life 3 will always be very action-oriented, but with many RPG elements: open-world, quests and NPCs will be waiting for you! One of the inspirations [for] the developers would also be the series of Elder Scrolls (Skyrim, Oblivion)."
The source claimed that the development of Half-Life 3 has been "very chaotic," due to frequent shifts in the Valve's vision for the gameplay's direction, and that it has been "revived several times."