In an announcement to staff, following a review of its operations, Guardian News & Media, said: "GN&M will develop its current weekend offering and introduce a greater degree of integration between the editorial teams of The Guardian and The Observer."
The announcement quashes speculation that The Observer is to be closed as GMG looks to cut costs.
The group is now working on developing the Saturday issue of The Guardian and a new-look Observer, which is expected to hit newsstands later this year.
However, sources suggest the overhaul of The Observer will not be as radical as some expect.
In a statement, Alan Rusbridger, editor-in-chief of GN&M, said: "A new-look Observer produced by John Mulholland and his team, and new ideas for the Saturday Guardian, were extremely well received.
"As a result of the review, we will be publishing a formidable weekend package- with two papers that complement each other, each retaining a distinctive tone and voice."
In July, GMG, which has earmarked cost savings of £20m across the editorial and commercial operations of GN&M, reported plunging profits at its national newspaper division.
Operating losses rose to £36.8m in the year to the end of March, while turnover fell from £261.9m to £253.6m.
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