The Last Guardian is still in development. In fact, it's "under earnest development," Ico and Shadow of the Colossus creator Fumito Ueda told Famitsu. To help explain the game's constant absence from industry events, Ueda noted that SCE Japan Studio has other projects like Puppeteer and Knack that are "taking priority right now."
The Last Guardian was first announced at E3 2009 during Sony's keynote, then received a "holiday 2011" release window before it was unceremoniously delayed and Team Ico was shuffled in with SCE Japan Studio. Sony confirmed Ueda's departure from the company in December 2011, though Ueda reaffirmed that The Last Guardian was under his creative supervision as of February, as he remained committed to finishing the game as part of his contract. Sony CEO Jack Tretton said the game was "on hiatus" in June.