A typhoon signal No 8 will be issued at 6.20pm on Thursday as Super Typhoon Yagi gets closer to Hong Kong, the observatory said.
The storm is forecast to bring strong winds and heavy downpours to the territory.
"Local winds will strengthen progressively and weather will deteriorate. The intense rainbands associated with Yagi will affect the territory gradually later today," the observatory said.
"The observatory will issue the Gale or Storm Signal, No 8 at 6.20pm this afternoon."
The No 3 storm signal was issued at 6.40pm on Wednesday.
The observatory said that according to the present forecast, Yagi will remain at super typhoon intensity and skirt around 300 kilometres to the southwest of Hong Kong on Friday morning.
It added that Yagi is a mature storm, and under the influence of its outer circulation, strong winds will affect many places in the territory, with occasional gale force winds on high ground.