The speculation started after the mother-of-three cryptically told AAP that "a decision has been made about my future," but failed to elaborate any further.
Lydia also admitted to AAP that she's unsure when season four will begin filming, as the production company behind the show, Matchbox Pictures, is currently busy preparing The Real Housewives of Sydney and New Zealand's The Real Housewives of Auckland, which is set to premiere in August on Bravo New Zealand.
Another source tells Daily Mail Australia that the cast "are all confused" about the show moving forward as Matchbox tries to balance the already successful Melbourne franchise with its upcoming Sydney spin-off.
These rumors also came after original cast member Chyka Keebaugh announced her departure from the series after three seasons.
This past Sunday, Chyka took to Instagram to announce her departure from the Foxtel hit series. "To all my friends on social media,I wanted to thank you for the wonderful posts and connections shared over my four year journey as a Real Housewife of Melbourne, I've had so much fun!! Reality TV is a ride and I have enjoyed it thoroughly, but that ride for me is now over," wrote Chyka.
She added: "I have decided to close this door in order to make way for some exciting new opportunities within the lifestyle arena, for the “Chyka Home and Life” mediabrand. Please know I have had a ball - laughed, cried, dressed up, been places and done some things I never expected. No regrets, only brilliant memories. I have loved your constant online friendship and support, I can only hope we stay connected."
The Real Housewives of Melbourne Season 3 wraps up on May 15 with a 90-minute reunion special. Chyka Keebaugh has been feuding with co-star Lydia Schiavello this season after many of the Wives' claimed that Schiavello was spreading rumors about Keebaugh's family behind-the-scenes.
Chyka is the second Housewife to leave the Foxtel reality series following Andrea Moss' departure after Season One in 2014.
The Real Housewives of Melbourne airs Sunday nights at 8:30pm only on Arena. For International TV Listings click here!
Photo Credit: Foxtel