What Happened to Obsidian Entertainment's Fallout Games?

Obsidian Entertainment's connection to the Fallout series runs deep, predating the studio's formation. Many of its founders were key developers at Black Isle Studios, responsible for the original 'Fallout' and 'Fallout 2' games. This lineage made them a natural fit when Bethesda Softworks, after acquiring the Fallout IP, contracted Obsidian to develop a spin-off. The result was 'Fallout: New Vegas', released in October 2010. Despite a tight 18-month development schedule and initial bugs, 'New Vegas' was lauded for its intricate writing, player choice, and deep RPG mechanics, often considered a high point in the series by fans.

Following 'New Vegas', Obsidian focused on developing its own intellectual properties and other licensed titles, including 'Pillars of Eternity', 'The Outer Worlds', and 'Grounded'. The studio faced financial challenges at times, leading them to crowdfund 'Pillars of Eternity', which proved successful. In November 2018, Microsoft acquired Obsidian Entertainment, integrating it into Xbox Game Studios. This acquisition provided Obsidian with greater stability and resources, allowing them to pursue more ambitious projects like 'Avowed' and 'The Outer Worlds 2'.

For years, fans consistently expressed a desire for Obsidian to return to the Fallout franchise, often speculating about a 'Fallout: New Vegas 2'. While Bethesda, the IP owner, was focused on 'Fallout 4', 'Fallout 76', 'Starfield', and 'The Elder Scrolls VI', the possibility of Obsidian developing another Fallout game seemed distant. However, the success of the 'Fallout' TV series on Amazon Prime Video in 2024 and 2025 reignited interest in the franchise and its gaming roots.

The landscape dramatically shifted in July 2026. As part of a sweeping 'Xbox reset' initiated by new Xbox CEO Asha Sharma, Microsoft implemented significant layoffs across its gaming division, impacting Obsidian Entertainment, which saw approximately a quarter of its workforce laid off. Alongside these layoffs, multiple projects at Obsidian were reportedly canceled, including a planned sequel to their 2025 RPG 'Avowed', which was said to be progressing well and on track for a 2027 announcement.

Crucially, Bloomberg reported on July 8, 2026, that Obsidian is now pivoting to develop a new Fallout game. This highly anticipated return to the wasteland will reportedly be led by Josh Sawyer, the acclaimed director of 'Fallout: New Vegas'. Bethesda Game Studios is also expected to be involved in some capacity, providing support for the project. While details are scarce and the strategy is still described as 'in flux', this development marks a significant turning point, bringing Obsidian back to the franchise that many fans believe they are uniquely suited to develop, especially given the long wait for 'Fallout 5' from Bethesda.