The move is likely to lead to a 10% headcount reduction across Guardian News & Media's 760-strong non-editorial team, according to an industry source.
The redesigned Observer paper, which will hit news-stands next year, will be published in four weekly sections: sport, news, the Observer magazine and an enlarged Review section. The Observer Food Monthly title will remain, but Sport Monthly, Music Monthly and Observer Woman will be axed.
The changes will lead to business and personal finance coverage shifting into the main news section. Travel will be absorbed into the Observer magazine.
GNM recently reopened its voluntary redundancy scheme. The number of departures prompted by the latest Observer changes has yet to the finalised.
The Observer will continue to have a dedicated editorial team, but some reporters will be integrated across the Guardian and its website, Guardian.co.uk
In June, GNM made a 10% headcount reduction across its commercial division, which hit advertising, marketing, production and distribution.
The NUJ has hit out at the latest cuts at the Observer.
Barry Fitzpatrick, NUJ head of publishing, said: "This is a move that will make the Observer less competitive in what is already exceedingly tough marketplace."
GMN was unavailable for comment.
This article was first published on mediaweek.co.uk