Guardian Media Group has announced that it remains committed to publishing the Observer – ending six weeks of uncertainty over the title's future.
The announcement follows high-profile campaigns by Press Gazette and the National Union of Journalists urging GMG to safeguard the future of the oldest Sunday newspaper in the world.
Guardian News and Media is currently carrying out a strategic review of all its operations in order to curb annual losses which last year totalled £36.8m.
News emerged at the beginning of August that closing the Observer was one of the cost-saving options being considered.
Now GMG has revealed the results of the aspect of the review covering weekend publishing. The public statement comes as a Stand up for the Observer public meeting is due to be held in London on Monday - featuring a hosting of famous figures associated with the title.
And it ends a damaging period of uncertainty which has seen high profile figures such as head of magazines Nicola Jeal and interviewer Lynn Barber leave the title.
GNM has said that it plans to publish a "new-look" Observer as well as a Saturday Guardian.
Other options understood to have been under consideration were turning the Observer into a weekly news magazine or launching a Sunday edition of the Guardian.
GNM said it now plans to "develop its current weekend offering and introduce a greater degree of integration between the editorial teams of the Guardian and Observer".
Editor-in-chief Alan Rusbridger has written to all GNM journalists warning them that further editorial redundancies will be needed and saying that a voluntary redundancy scheme will be re-opening.
Rusbridger said in a statement: "Given the present state of recession and digital transition there isn't a media group in the world that isn't reviewing its publishing operations and the nature of its journalism.
"The weekend review has been rigorous and very helpful in understanding the changing needs of readers.
"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."
GMG chief executive Carolyn McCall said: "GNM is looking to the future and making sure it's in good shape to deal not only with recession but also the profound changes in media that are not going to disappear when advertising markets recover. By taking the right action now we serve the long-term interests of our journalism."
Liz Forgan, chairwoman of the Scott Trust (which owns GMG) said: "In this changing media world it is right that the Trust and the company ask the most difficult and searching questions as we consider how best to maintain the health of our journalism. The Trust fully supports the company's thorough and clear-eyed review of its operations."