Following a fair amount of speculation, Peter Molyneux has announced that Fable III will indeed utilize Project Natal technology.

Speaking at BAFTA’s Annual Video Games Lecture in London this evening, Molyneux revealed that he would be “crazy” not to take advantage of Natal’s motion sensing technology for the forthcoming Fable III. However, before you go getting all excited/angry about the prospect of diving around your living room Fable-style, don’t chuck your controller out the window yet. While Natal functionality will be used, Molyneux also said that “Fable III will be controller based, for sure.”

So what does all this mean? Well, with his PR manager giving him the evil eye from the audience (at one stage Molyneux joked that he would be assassinated onstage if he said too much), the Lionhead boss wasn’t willing to say make any revelations. However, it’s clear that while Fable III will control in a normal fashion, some commands will be optionally possible via Natal. We’re intrigued.