Updated, 6:02 p.m. EST
A spokesman for the studio told TheWrap: "We are analyzing what to do with the project."
Jewish groups were outraged after news broke in September that Gibson had reached a production deal with Warner's to direct the story of Judah Maccabee, whose victory over Greek and Syrian armies is celebrated at Hanukkah. One Jewish group called it “a moral lapse in judgement.”
Also read: Mel Gibson's Judah Maccabee Film Stirs Jewish Leaders' Ire
Rabbi Marvin Hier, founder and dean of the Simon Wiesenthal Center, said he was pleased that the project had been shelved.
"Jewish history will be better off without Mel Gibson playing Judah Maccabee," Hier told TheWrap.
Eszterhas (pictured at left) delivered the script in late February, and Warner's has since passed on it, according to an individual close to the project. Warner production president Greg Silverman described it as lacking in “feeling” and “a sense of triumph," according to the individual.
As another individual put it: "The script didn't pass muster."
But in an explosive letter to Gibson obtained by TheWrap, Eszterhas said that the director never planned to make the movie, and was using him to deflect Gibson's anti-Semitic reputation.
He wrote: “I’ve come to the conclusion that the reason you won’t make ‘The Maccabees’ is the ugliest possible one. You hate Jews.”
Update: Gibson responded in a letter to Eszterhas:
"Both Warner Brothers and I were extraordinarily disappointed with the draft. In 25 years of script development I have never seen a more substandard first draft or a more significant waste of time. The decision not to proceed with you was based on the quality of your script, not on any other factor."
Gibson also apologized for using "colorful" language, but said that much of Eszterhas's observations were "utter fabrications."
Eszterhas declined to comment.
Warner's has a long history of collaborating with Gibson, but the star was upset after the studio rescinded his cameo in "The Hangover Part II" when the crew protested his involvement
The project involved one of Gibson’s favored themes — an underdog army fighting for freedom. In 165 B.C., Jewish leader Maccabee led his brothers in revolt against the Seleucid Empire, ruled by Antiochus Epiphanes who had forbidden Jewish practices.
Noting his checkered history of making anti-Semitic remarks and his controversial depiction of Jews in his 2003 film “The Passion of the Christ,” Jewish leaders said the choice of Gibson to direct a film about a prominent figure in their religion was insensitive.
"Casting him as a director or perhaps as the star of 'Judah Maccabee' is like casting Madoff to be the head of the Securities and Exchange Commission," Hier said in a statement after the project was announced.
The Anti-Defamation League asked Warner's to reconsider the choice of Gibson. In a statement, the group said: “Not only has Mel Gibson shown outward antagonism toward Jews and Judaism in his public statements and actions, but his previous attempt to bring biblical history to life on the screen was marred by anti-Semitism.”
The American Gathering of Holocaust Survivors and their Descendants labeled the choice of Gibson a “moral lapse of judgement.”
“Given our brutal experience, we are pained that Warner's has abandoned principle and taken this unworthy path,” the group said at the time.
Gibson was detained by police in Malibu for drunken driving in 2006 and found himself embroiled in a public relations fiasco when reports surfaced that he had launched into expletive-laden anti-Semitic remarks while in custody.
It was left to Eszterhas to offer a modest defense of Gibson in a New York Times interview in February. The screenwriter noted that he had an anger problem but said he understood how to make a movie of the story of Maccabee on a “Braveheart”-like scale.
"We both saw it as Mel, maybe from his heart, wanting to do a terrific 'Braveheart'-like movie about Jewish history," said Eszterhas, who said he was comfortable working with Gibson despite his problem.