Pedro Acosta will be promoted to the Tech3 GASGAS team alongside Pol Espargaro.
Augusto Fernandez will be forced to settle for a role as the test and reserve rider, Speedweek report.
Brad Binder and Jack Miller will continue as the factory duo.
KTM had a luxury problem with the addition of teenage starlet Acosta to the premier class in 2024.
The manufacturer asked Dorna for a fifth bike, then enquired about taking over one of the existing satellite teams, to increase their presence on next year’s grid.
Both of those plans ended in failure meaning KTM will be limited to their current four bikes, and giving them a headache over their rider line-up.
Fernandez, the rookie who has impressed enough this season to be rewarded with a new contract, will not have a full-time seat.
But he will race in at least six grands prix as a wildcard, it is reported, and would fill in for injuries elsewhere.
Acosta, still only 19 but leading the Moto2 championship, will get his step-up despite shockingly expressing doubt over his future this past weekend.
"Due to the planned 22 Grand Prix, it is becoming increasingly important for the factories to have strong test and reserve drivers under contract," KTM bosses Stefan Pierer and Hubert Trunkenpolz told Speedweek.
Dorna floated the idea of regular ‘substitutes’ in 2024 - a potential way for teams to navigate the challenging 22-round calendar, factoring in a sprint race at every event.
Miller labelled this idea “shitty” when he was asked about it.
The good news for Fernandez is that KTM’s determination to have an extra satellite team in 2025 - a total of six bikes - means he is very likely to return to the grid full-time.