Yes, they definitely are! The founding member and Senior Vice President of Product Development for Blizzard, Frank Pearce spoke with Gamasutra at E3 2007. He confirmed that his firm has a third team at work, which is NOT working on World of Warcraft and StarCraft II.
Frank Pearce told Gamasutra, “Our global headcount is 2,700. And most of that is customer service for World of Warcraft! In terms of development staff it’s probably around 350. World of Warcraft is about 135 people, 40 for StarCraft II, 40 for team 3, our cinematics team is about 85 guys. Then there’s sound and Q/A and that sort of thing. Team 3 is working on something really awesome. I can’t give you any hints, but it’s totally awesome.”
However, Pearce did not reveal any more details about the new game by Blizzard. It seems likely that they will be coming out with all the details of this game at the upcoming Blizzcon.