South Yorkshire Police and Humberside Police and are to cut the number of dogs and handlers to a combined total of 25.
The South Yorkshire force will halve the size of its current dog unit, with 12 officers and dogs being lost as part of the restructuring.
The new operation will have two bases in Sheffield and one in Melton, East Yorkshire.
Humberside Police said it currently had 12 dogs and handlers.
South Yorkshire Police said that the move was "required to meet budgetary cuts imposed on the Force's Operational Support Services".
In August, the force said it needed to make savings of Â£59m by 2020, with the potential loss of 1,500 staff.
A spokesman for South Yorkshire Police said: "Police dogs and their handlers provide a range of important roles in helping to keep the public safe.
"Whilst we are reducing the size of the unit in South Yorkshire, by merging with Humberside, it allows us to maintain the same number of officers and dogs and continue to perform a valuable role for the public, yet at the same time we can still meet the savings required due to the unprecedented cuts."
The merger of the dog units is one of a number of cost cutting measures introduced by police across Yorkshire in the last few years.
Two years ago , Humberside Police disbanded its mounted unit, with horses now hired in from other forces when needed.
All four Yorkshire forces now share an underwater search unit.

In an interview with Fox News, he said: "There are a lot of killers. We've got a lot of killers. What do you think? Our country's so innocent?"
Mr Trump said he respected President Putin and would prefer to "get along with him".
He said he wanted help from Russia in the fight against "Islamic terrorism".
Excerpts of the interview with Bill O'Reilly, carried out at Mr Trump's Florida home, have been released ahead of the full interview being broadcast by Fox ahead of Sunday evening's Super Bowl, and on the two following nights.
Asked whether he respected Mr Putin, the US president replied: "I do respect him... well I respect a lot of people. That doesn't mean I'm going to get along with him."
He added: "I say it's better to get along with Russia than not. And if Russia helps us in the fight against Isis [so-called Islamic State], which is a major fight, and Islamic terrorism all over the world - that's a good thing. Will I get along with him? I have no idea."
The two men spoke on the phone last Saturday and have agreed to stay in "regular personal contact" but no date has been set for a meeting.
Mr Trump was also asked whether it was responsible to make claims about issues without citing facts to back them up, such as his contention that millions of people voted illegally during the US presidential election that he won - but with almost three million fewer votes than his Democratic opponent Hillary Clinton.
He replied: "Many people have come out and said I'm right, you know that.
"When you see illegals, people that are not citizens and they are on the registration rolls... you have illegals, you have dead people... it's really a bad situation."
Two police forces in Yorkshire are to merge their dog units to reduce costs.
[NEXT_CONCEPT]
US President Donald Trump has defended Vladimir Putin when questioned over allegations of murders carried out by the Russian state.