The move mirrors BMW's recent decision to drop its naturally aspirated V10 in favor of a twin-turbo V8. According to Germany's Autobild, Mercedes has already begun developing future models without sufficient space for a V12, so the decision is seemingly long-term and permanent.
Models currently featuring the company's 6.0-liter V12 include the S600, CL600, SL600, S65, CL65, and SL65.
The rumors seem to echo a report from April about AMG's future engine offerings. The U.K.'s Car magazine reported the performance division's 6.2-liter V8 would be replaced by a twin-turbo 5.0-liter V8. It went on to say the 6.0-liter V12 would be replaced by an even more powerful version of the turbo V8, possibly with as much as 700 horsepower.
The report indicated Mercedes might also be working on non-AMG V8s, including a 355 horsepower 4.0-liter, a 435 horsepower 4.6-liter, and a 544 horsepower 5.5-liter.
All of this can be viewed as a stepping stone to even more efficient technologies. AMG is rumored to be working on a plug-in hybrid powertrain that will hit the market in 2012. A traditional hybrid system, dubbed BluePower, could arrive even sooner.