Xbox’s RPG studio Obsidian is making a new Fallout game with Bethesda and Fallout: New Vegas’ game director — and it’s canceled an Avowed sequel to do it

Shortly after it was reported that Xbox’s RPG studio Obsidian Entertainment lost 25% of its workforce to Microsoft’s mass Xbox layoffs earlier this week, it’s come to light that the developer has moved on from other projects to work on a new Fallout game.

That news comes from a new Bloomberg report that Windows Central can corroborate with our own sources. According to those familiar with the situation at the storied Irvine-based studio, multiple planned projects — including a sequel to 2025’s Pillars of Eternity action RPG Avowed — have been canceled to prioritize the Fallout title.

Notably, the team working on the new Fallout game will be led by Josh Sawyer, the game director of Obsidian’s legendary 2010 title Fallout: New Vegas that was developed in partnership with Bethesda to fill the gap between 2008’s Fallout 3 and 2011’s The Elder Scrolls 5: Skyrim. New Vegas is widely considered by many fans to be the series’ best RPG, lauded for its writing quality, reactivity to player actions, and deep, systems-driven gameplay design.

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Bloomberg reports that previously, Sawyer was working on an RPG that was “similar structurally and thematically to Fallout,” but wasn’t actually part of the iconic franchise.

Avowed

In order to prioritize and focus on its newly planned Fallout game, Obsidian is canceling a sequel to its 2025 Pillars of Eternity RPG Avowed. (Image credit: Xbox Game Studios)

It’s also been said that Bethesda Game Studios — the steward of the Fallout IP, and the developer behind the creation of Fallout 3, Fallout 4, Fallout 76, and the Fallout Shelter spinoff — will work with Obsidian on the new game. At the moment, it’s unclear if this means the two studios will directly co-develop it together, or if Bethesda will merely provide support.

Demand for a new mainline Fallout entry is very strong right now, what with Amazon’s extremely popular Fallout TV show, now filming its third season, driving significant excitement for and interest in the post-apocalyptic sci-fi property.

With Bethesda largely focused on The Elder Scrolls 6 after Starfield and Fallout 5 a long way off, I’m not surprised to see Microsoft and Xbox direct Obsidian to pivot over to the series. After all, given its experience working on it with New Vegas, you could argue there’s not a team better suited for the task…though, Obsidian losing a quarter of its staffers — many of whom are reported to have been senior devs — makes me wonder how many of New Vegas’ creators are actually still there.

As for the canceled Avowed sequel? Development on it was reportedly progressing smoothly and Obsidian was planning to announce it in 2027, but in the end, it didn’t fit in with Xbox’s new “reset” and plans to double down on its largest franchises. Its CEO Asha Sharma recently stated she wants the brand to “move faster” with core IPs like Fallout.

It’s been said that some Obsidian devs will continue to work on the sequel with hopes that it will one day be fully greenlit again. Additionally, the studio will continue to develop planned DLC expansions for 2025’s The Outer Worlds 2 RPG, as well as content for the Early Access survival game Grounded 2.

Are you excited for Obsidian to make a new Fallout, or would you have preferred it to finish its Avowed sequel? Let me know in our poll above, and in the comments below.

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