Network partitioning has gained recent attention as a pathway to enable decentralized operation and control in large-scale systems. This paper addresses the interplay between partitioning, observability, and sensor placement (SP) in dynamic networks. The problem, being computationally intractable at scale, is a largely unexplored, open problem in the literature. To that end, the paper's objective is designing scalable partitioning of linear systems while maximizing observability metrics of the s