Eleven companies are being "clustered together" by similarity of business and geographical location, Denel said, for sharing of non-core and support services and for better use of office space and manufacturing facilities.
Denel Land Systems and Mechem will be integrated into a single entity and Denel Aviation will incorporate Denel Technical Academy and Denel Personnel Solutions.
Denel Aerostructures will remain as stand-alone company but will share certain management functions and support services with Denel Aviation.
"Our objective is for Denel to be managed and perceived as one, integrated business," said Denel Group Financial Director Fikile Mhlontlo.
"Denel is a strategic national asset for South Africa and as a state-owned company we will play a growing role to contribute to national objectives in terms skills development, research and the growth of a viable high-tech manufacturing industry."
The group said corporate management is also being streamlined and that new appointments have been made to ensure succession planning and to promote diversity and employment equity.