Hello there...
There are two ways you can do this that I know of, there are probably many more.
1. Move the planar face of the smaller cylinder into the larger cylinder part.
2. Knit or Offset a surface (0distance) on the large cylinder.
3. Cut with surface.
This leaves you with two distinct bodies. If you wanted to merge them, you would use Combine. The attached file is in SW2015.
Hope this helps, and good luck!
Start a sketch on the surface of the part on right in your pic. Select the surface - sketch - convert entities (creates a circle where you highlighted blue is) then extrude boss - up to next.
Thank you.
Start a sketch on the surface of the part on right in your pic. Select the surface - sketch - convert entities (creates a circle where you highlighted blue is) then extrude boss - up to next.