CSIRO Digital Productivity business unit and NICTA researchers will come together to form a new CSIRO entity called Data61 in July 2016.
However, there will be a shared brand and interface to customers from September this year.
In May 2014, the government announced that it would end financial support for NICTA from June 2016 with the organisation forced to fend for itself.
The organisation would be forced to seek private sector and grant-based funding.
The two organisations have been in discussions since February about working as a single organisation to harness research strengths and capabilities in digital technology.
A CSIRO spokesman said its priority is to maintain current levels of research capability.
"We do know there is likely to be some duplication of support areas in the new entity and it is anticipated that some of these positions may be redeployed into the broader CSIRO functions," the spokesman said.
"CSIRO and NICTA are confident that through this merger, Australia’s digital research capability will be enhanced, providing an opportunity to leverage off complementary strengths to build a better, more impactful capability for Australia."
CSIRO's Digital Productivity business unit has approximately 350 staff and 180 affiliates. The staff are based in Sydney, Brisbane, Melbourne, Hobart, Canberra and Perth.
NICTA has approximately 350 staff and 300 PhD students. It has offices in Sydney, Melbourne, Canberra and Brisbane.
According to Minister for Industry and Science Ian Macfarlane, having one organisation will enable Data61 to produce focussed research that will deliver strong economic returns.
“The new combined entity will continue to train Australia’s future digital technology leaders through the enhanced PhD programme, with more than 300 technology PhDs enrolled at partner universities,” he said.
Data61 will be led by technology entrepreneur Adrian Turner who wants to harness the start-up culture of NICTA and multidisciplinary strength of CSIRO.
“So much of our understanding and interaction with the world is underpinned by digital technology and data,” said Turner.
"Data61 will be well-positioned to play a leading role in defining the new economic structures and opportunities that are emerging globally.”
Turner was managing director and co-founder of the Borondi Group, a company that applies emerging technologies in industries such as agriculture, mining and transportation.
Follow Hamish Barwick on Twitter: @HamishBarwick