We show that oxygen vacancies at titanate interfaces induce a complex multiorbital reconstruction which involves a lowering of the local symmetry and an inversion of t2g and eg orbitals resulting in the occupation of the eg orbitals of Ti atoms neighboring the O vacancy. The orbital reconstruction depends strongly on the clustering of O vacancies and can be accompanied by a magnetic splitting between the local eg orbitals with lobes directed towards the vacancy and interface dxy orbitals. The reconstruction generates a two-dimensional interface magnetic state not observed in bulk SrTiO3. Using generalized gradient approximation (LSDA) with intra-atomic Coulomb repulsion (GGA+U), we find that this magnetic state is common for titanate surfaces and interfaces.