There’s been rumours flying around all summer, but they’ve just recently been confirmed. There’s no press release from Sunrise yet, but this is as confirmed as it’s going to be.
http://inuyasha-info.virtue.nu/
A two parter airing on September 13th, containing episodes 166-167 will end the TV series. The episodes, according to their title, will likely be the events which transpire on Volume 36 of the manga, chapters 353-356. The anime thus skips over a LOT of the manga to get this far, as the end of the most recent episode based on the manga was taken from Volume 34, chapter 332.
More than likely there will be OVAs to follow in due time to fill in the holes they skipped over and anime the remainder of the manga, which is still being written. The manga is rumoured to end shortly after this summer.
And thus we bear witness to the end of another long-running Rumiko Takahashi series. At least the Cartoon Network has plenty of episodes left to (ugh) dub, and air.