As first reported by TMZ, Sheen no longer wants to work with the actress, who plays his onscreen therapist Dr. Kate Wales, after she reportedly complained about his work ethic to Anger Management executives.
"Things have gotten ugly," one source on set tells us, adding that Charlie does not have the exclusive right to fire anyone, but he "certainly can make production impossible."
Sheen has threatened not to show up to work if the issue is not resolved.
FX picked up four years' worth of Anger Management episodes last year, and the series shoots rapid-fire, cranking out two episodes per week instead of the usual one.
An FX source says it's possible the show could continue without Blair, but nothing has been decided yet.
FX and reps for both actors did not immediately return E! News' request for comment.