In a joint statement, the charities said the merger would give Plan new expertise and allow Interact to gain access to more communities in poorer regions of the world.
But Interact, which has 30 projects in Africa, Asia and Latin America, said there were financial reasons behind the move as well as it being a "merger of ideas and development strategies".
Jenny Borden, interim chief executive of Interact, said: "We have financial difficulties primarily stemming from our success in obtaining a lot of restricted funding from the EU, which required 25 per cent match funding. We have had difficulty in finding the match funding and we didn't want to scale down our very good projects. The merger will secure the future of the programmes."
Interact will retain its brand and charitable registration but will come under Plan's legal control. A new Interact trustee board will be appointed, drawn from Plan board members and existing Interact trustees.
All 19 of Interact's staff will retain their jobs, but Borden, who joined the charity last year, will leave this week.
The two charities will move into a new office in 2010.
Marie Staunton, chief executive of Plan, said: "This merger will benefit our work with young people at risk of early pregnancy or sexually transmitted diseases."