Obsidian Moves Under Bethesda as It Begins Work on a New Fallout Game

# What changed Microsoft announced a reorganization of Xbox Game Studios on September 22, 2026. As part of that reshuffle, Obsidian Entertainment was moved under Bethesda. The change groups Obsidian alongside Bethesda Game Studios and aligns the studio with Fallout development efforts.

# Why this matters Obsidian is an established role-playing studio known for collaborations and original RPGs. The move affects how Obsidian's current and future work will be managed inside Microsoft's first-party structure. Microsoft framed the shift as part of a broader strategy to concentrate resources on fewer major franchises such as The Elder Scrolls, Diablo, and Fallout.

# What Obsidian is working on now Microsoft's announcement — relayed in a blog post by Xbox leadership — said Obsidian's ongoing projects will continue. Grounded was explicitly mentioned. The post did not reference other Obsidian franchises, including a previously discussed Avowed sequel.

# Fallout responsibilities and other Fallout news Obsidian has been assigned to develop a new Fallout game under Bethesda's umbrella. Separately, remasters of Fallout 3 and Fallout: New Vegas are planned, and Fallout 5 remains in pre-production at Bethesda Game Studios. Obsidian's involvement represents Microsoft's effort to leverage internal studios to expand Fallout output.

# Context: Obsidian's background and Microsoft ownership Obsidian was founded in 2003 and built its reputation through projects such as Star Wars: Knights of the Old Republic II with BioWare and Fallout: New Vegas in collaboration with Bethesda. The studio later funded and released Pillars of Eternity and created The Outer Worlds. Microsoft acquired Obsidian in 2018 as part of a push to strengthen Game Pass content.

# The corporate reset and workforce impact The reorganization follows a larger Xbox "reset" that included layoffs and studio divestitures. A company-wide message cited the elimination of 268 roles across Halo Studios, other first-party studios, and Xbox central functions. Microsoft described the actions as part of aligning resources around fewer, larger franchises.

# What to watch next

• Bethesda's management.

• Announcements about the Fallout remasters and how Obsidian's assignment interacts with Fallout 5's pre-production at Bethesda.

# Bottom line Obsidian's move under Bethesda reassigns an established RPG studio into the Fallout development pipeline while the broader Xbox reorganization narrows focus onto major franchises and reduces some staff and management layers. Current projects will proceed, but future plans for Obsidian's own IP remain uncertain based on the company statements released so far.