Games like The Observatory
Games like The Observatory include Outlast, Firewatch, Layers of Fear (2016), What Remains of Edith Finch, and Poppy Playtime. We matched them by the tags players give The Observatory on Steam (Psychological Horror, Horror, Walking Simulator, Short, and Atmospheric): closest matches first, and among equally close ones the better-known games.

Outlast
Shared: Horror · Psychological Horror · Atmospheric

Firewatch
Shared: Walking Simulator · Atmospheric · Adventure

Layers of Fear (2016)
Shared: Psychological Horror · Horror · Walking Simulator

What Remains of Edith Finch
Shared: Walking Simulator · Atmospheric · Adventure

Poppy Playtime
Shared: Horror · Psychological Horror · Survival Horror

Amnesia: A Machine For Pigs
Shared: Horror · Walking Simulator · Psychological Horror

Visage
Shared: Psychological Horror · Horror · Survival Horror

SOMA
Shared: Psychological Horror · Horror · Atmospheric

MiSide
Shared: Psychological Horror · Horror · Atmospheric

Iron Lung
Shared: Horror · Psychological Horror · Atmospheric

Garten of Banban
Shared: Horror · Psychological Horror · First-Person

Five Nights at Freddy's
Shared: Horror · Psychological Horror · Survival Horror

The Cabin Factory
Shared: Psychological Horror · Horror · Walking Simulator

Outlast 2
Shared: Psychological Horror · Horror · Survival Horror

Mouthwashing
Shared: Psychological Horror · Horror · Atmospheric

From The Darkness
Shared: Psychological Horror · Horror · Walking Simulator

The Park®
Shared: Psychological Horror · Horror · Walking Simulator

Escape the Backrooms
Shared: Horror · Psychological Horror · Survival Horror

Among the Sleep - Enhanced Edition
Shared: Horror · Atmospheric · Walking Simulator

Lethal Company
Shared: Horror · Psychological Horror · First-Person

Resident Evil 7 Biohazard
Shared: Horror · Psychological Horror · Survival Horror

Backrooms: Escape Together
Shared: Horror · Psychological Horror · Atmospheric

Slender: The Arrival
Shared: Horror · Psychological Horror · Survival Horror

[Chillas Art] The Convenience Store
Shared: Horror · Psychological Horror · Adventure