Apparently, the information was leaked by a source close to Bioware. Primotechnology reports:

The game is being developed by the company’s Austin studio, formed in 2006 and headed by BioWare Creative Director James Ohlen, whose past credits include the first KOTOR, Neverwinter Nights, and Baldur Gate’s I and II.”

As the rumor goes, the new game should be released in 2009.

The idea of turning the KotOR franchise into an MMO might sound good to some Star Wars fans. After all, Star Wars Galaxies (the only SW MMO up to this point) has been very good at driving MMO players away in the last couple of years and chances are it won’t be long before it’s axed altogether.

On the other hand, this would also mean that plans for KotOR III have been put away in a kolto tank and will be left there for several years at least. Instead of getting to see what awaits Revan and the Exile in the Outer Rim, players will get to kill the dreaded space murlocs and raid Darth Nihilus’ home. Plus two expansion packs: “The Burning Jedi Crusade” and “The Wrath of the Sith King”.

Then again, it could just be another rumor, so put down your lightsabers until the official announcement.