Obsidian moves under Bethesda as Xbox confirms new Fallout project

Obsidian Entertainment has a new home inside Xbox and a new Fallout project on its books.

Xbox confirmed on 22 September 2026 that the role-playing studio has moved from Xbox Game Studios to Bethesda, in a post titled 'Continuing Our Reset' Xbox. The studio will keep its leadership and its current games, while starting joint work on Fallout.

Obsidian chief executive Feargus Urquhart and the existing leadership team will continue to lead the studio. The studio will now report to Bethesda president Jill Braff.

Braff told staff that the creative identity and strengths that make Obsidian distinct will remain at the core of the studio and its work, according to details reported on 23 September 2026 Eurogamer. No change in day-to-day leadership was announced.

On Fallout, the lines are clear. Bethesda Game Studios will continue to lead the franchise. Obsidian and Bethesda Game Studios are now working together on a new Fallout project, with more to be shared in the months ahead.

For players, this means continuity first. Obsidian will continue its current projects, including Grounded, after moving under Bethesda. Grounded is its co-op survival series, where players are shrunk to insect size in a back garden.

The Obsidian shift is part of a wider reorganisation. Halo, Rare and World's Edge, previously under Xbox Game Studios, have been placed under Activision's control. Activision is the publisher of Call of Duty, which Microsoft owns alongside Xbox, Bethesda and Blizzard.

The reset is the largest of its kind for the games division. Xbox has described its 2026 reorganisation as the most significant restructure in Xbox history. Microsoft said the changes were intended to reduce organisational complexity and concentrate resources.

The human cost has been large. The reset began with 1,600 workers laid off and five first-party developers parting ways. First-party developers are studios owned outright by the platform holder. A further 268 roles were then cut.

Obsidian was hit in that earlier round. The studio reportedly lost around 25% of its workforce in Xbox's first round of mass layoffs in summer 2026 and cancelled several in-development projects. That figure is based on reporting, not an Xbox filing, and Xbox has not published a studio-by-studio breakdown.

What makes this stand out is the pairing. Two role-playing teams under one umbrella are now building in the same universe. Fans get a short wait for specifics. Xbox says more on the Fallout project will follow in the months ahead.