diff --git a/python/cudf/cudf/core/dataframe.py b/python/cudf/cudf/core/dataframe.py
index af3ba801a82..de324515729 100644
--- a/python/cudf/cudf/core/dataframe.py
+++ b/python/cudf/cudf/core/dataframe.py
@@ -4072,7 +4072,7 @@ def groupby(
         sort=False,
         group_keys=False,
         squeeze=False,
-        observed=False,
+        observed=True,
         dropna=True,
     ):
         return super().groupby(
diff --git a/python/cudf/cudf/core/indexed_frame.py b/python/cudf/cudf/core/indexed_frame.py
index 97dfb16bd32..95931af038c 100644
--- a/python/cudf/cudf/core/indexed_frame.py
+++ b/python/cudf/cudf/core/indexed_frame.py
@@ -3918,7 +3918,7 @@ def groupby(
         sort=False,
         group_keys=False,
         squeeze=False,
-        observed=False,
+        observed=True,
         dropna=True,
     ):
         if axis not in (0, "index"):
@@ -3929,7 +3929,7 @@ def groupby(
                 "squeeze parameter is not yet implemented"
             )
 
-        if observed is not False:
+        if not observed:
             raise NotImplementedError(
                 "observed parameter is not yet implemented"
             )
diff --git a/python/cudf/cudf/core/series.py b/python/cudf/cudf/core/series.py
index 57a3653edf1..6d4caebb8ad 100644
--- a/python/cudf/cudf/core/series.py
+++ b/python/cudf/cudf/core/series.py
@@ -3297,7 +3297,7 @@ def groupby(
         sort=False,
         group_keys=False,
         squeeze=False,
-        observed=False,
+        observed=True,
         dropna=True,
     ):
         return super().groupby(