The business and personal finance sections will be merged into the main paper, and the travel section into the Observer Magazine.
The changes will coincide with a redesign, leaving the paper with a news, sport, and expanded review section plus the Observer Magazine. The only one of its glossy monthly magazines to survive the cull is the Observer Food Monthly.
Observer staff were told of the changes, which include the reopening of a voluntary redundancy scheme, by editor John Mulholland today.
Although the Sunday paper will retain a dedicated editorial team, some journalists will move to integrated Guardian News & Media teams, working across The Observer, The Guardian and Guardian.co.uk.
The cost-saving measures are an attempt to stem heavy operating losses at Guardian News & Media, which widened to £36.8 million in the year to March 31.
Closing The Observer was considered by GNM parent company Guardian Media Group over the summer. However GMG ultimately ruled this out and in September announced it would instead pursue further integration of the Observer and Guardian editorial teams.
Tomorrow Guardian staff will hear how GMG's plans will affect them from Carolyn McCall, the chief executive of GMG, Tim Brooks, the managing director of Guardian News & Media, and Alan Rusbridger, the editor-in-chief of The Guardian.
Three weeks ago a restructure of GNM's commercial operations resulted in the departures of marketing director Marc Sands and general manager Joe Clark.
Commercial director Adam Freeman was promoted to director, consumer media, and handed more responsibilities including display ad sales, newspaper sales, and marketing.
More on Brand Republic
Gordon's Republic blog - Sad day for The Observer, but it is spared closure and cuts makes sense