diff --git a/activerecord/CHANGELOG b/activerecord/CHANGELOG
index c10bb9f416..b2e2a117fb 100644
--- a/activerecord/CHANGELOG
+++ b/activerecord/CHANGELOG
@@ -1,5 +1,7 @@
 *SVN*
 
+* Add note about how ActiveRecord::Observer classes are initialized in a Rails app. #10980 [fxn]
+
 * MySQL: omit text/blob defaults from the schema instead of using an empty string.  #10963 [mdeiters]
 
 * belongs_to supports :dependent => :destroy and :delete.  #10592 [Jonathan Viney]
diff --git a/activerecord/lib/active_record/observer.rb b/activerecord/lib/active_record/observer.rb
index cfdeae3592..6e4db637f5 100644
--- a/activerecord/lib/active_record/observer.rb
+++ b/activerecord/lib/active_record/observer.rb
@@ -125,6 +125,20 @@ module ActiveRecord
   #
   # Observers will not be invoked unless you define these in your application configuration.
   #
+  # == Loading
+  #
+  # Observers register themselves in the model class they observe, since it is the class that
+  # notifies them of events when they occur. As a side-effect, when an observer is loaded its
+  # corresponding model class is loaded.
+  # 
+  # Up to (and including) Rails 2.0.2 observers were instantiated between plugins and
+  # application initializers. Now observers are loaded after application initializers, 
+  # so observed models can make use of extensions.
+  # 
+  # If by any chance you are using observed models in the initialization you can still
+  # load their observers by calling <tt>ModelObserver.instance</tt> before. Observers are
+  # singletons and that call instantiates and registers them.
+  #
   class Observer
     include Singleton
 
diff --git a/railties/CHANGELOG b/railties/CHANGELOG
index f37702e380..e4a0a98d37 100644
--- a/railties/CHANGELOG
+++ b/railties/CHANGELOG
@@ -1,5 +1,7 @@
 *SVN*
 
+* Reshuffle load order so that routes and observers are initialized after plugins and app initializers.  Closes #10980 [rick]
+
 * Git support for script/generate.  #10690 [ssoroka]
 
 * Update scaffold to use labels instead of bold tags.  Closes #10757 [zach-inglis-lt3]
diff --git a/railties/lib/initializer.rb b/railties/lib/initializer.rb
index 899688b559..2a60ea2f56 100644
--- a/railties/lib/initializer.rb
+++ b/railties/lib/initializer.rb
@@ -87,16 +87,16 @@ module Rails
 
       load_plugins
 
-      # Observers are loaded after plugins in case Observers or observed models are modified by plugins.
-      load_observers
-
-      # Routing must be initialized after plugins to allow the former to extend the routes
-      initialize_routing
-
       # the framework is now fully initialized
       after_initialize
 
       load_application_initializers
+
+      # Routing must be initialized after plugins to allow the former to extend the routes
+      initialize_routing
+
+      # Observers are loaded after plugins in case Observers or observed models are modified by plugins.
+      load_observers
     end
 
     # Check for valid Ruby version