The new agency will be headed by journalist and keen Kremlin supporter Dmitry Kiselev.
The state-owned Voice of Russia radio station has also been closed. The decree was effective immediately.
Of all the state-owned media organisations, RIA Novosti has made the greatest attempt to produce balanced coverage in recent years. This was in part because of its international clients in media organisations around the world. It would have lost credibility otherwise.
But now the agency is being taken over by the Russia Today brand, which for opposition-minded Russians is more of a government mouthpiece, giving carefully selected news with a clear pro-Kremlin bias.
The word "propaganda" - never far from the Kremlin's opponents' lips when they are discussing state-controlled Russian television news - is now also being used to describe the new news agency.
Sergey Ivanov, the head of the Kremlin administration, has told journalists in Moscow that the news agency is being restructured in order to make it more economical while increasing its reach, Interfax reports.
Mr Ivanov was quoted as saying that the agency, which is being dissolved and reorganised as International News Agency Russia Today, needs to make "more rational use of public money" and that it has to be more effective.
"Russia pursues an independent policy and robustly defends its national interests. It's not easy to explain that to the world, but we can and must do this," he said.
For many Kremlin critics in Russia, that phrase suggests this is a sinister move by President Putin, says the BBC's Daniel Sandford in Moscow.
During Mr Putin's time as Russia's leader, RIA Novosti has tried hard to produce balanced coverage for Russian and international audiences, our correspondent says.
Although state-owned, it has reflected the views of the opposition and covered difficult topics for the Kremlin, our correspondent adds.
Mr Kiselev is known for his ultra-conservative views, including recently saying that gay people should be banned from giving blood, and that their hearts should be burnt rather than used in transplants.