Merlin is the product of the Nf2 tumor-suppressor gene, and inactivation of Nf2 leads to the development of neural tumors such as schwannomas and meningiomas in humans and mice. Merlin is a member of the ERM (ezrin, radixin and moesin) family of proteins that function as organizers of the actin cytoskeleton. Merlin structure is thought to be similar to that of the ERM proteins, and is held in a closed clamp conformation via intramolecular interactions of its N-terminal FERM (four-point-one, ERM) domain with an alpha-helical C-terminal domain. Like ERMs, merlin can remodel actin-rich cortical structures, yet merlin uniquely inhibits the proliferation of many different cell types. Here, we report that the F2 subdomain of the FERM domain and a domain close to the C-terminus that is defined by residues 532-579 are essential for merlin-mediated inhibition of primary Schwann cell proliferation. Furthermore, we demonstrate that the F1 subdomain of the merlin FERM domain is required for actin colocalization, proper regulation of merlin C-terminal phosphorylation and for remodeling the cytoskeleton, yet is not required for the inhibition of Schwann cell proliferation. Thus, tumor suppression by merlin is independent of its role as an organizer of the actin cytoskeleton in Schwann cells.