The extension of lamellipodia, which are thin, fanlike projections at the cell periphery, requires the assembly of branched actin networks under the control of the small GTPase Rac1. In melanoma, a hyperactive P29S Rac1 mutant is associated with resistance to inhibitors that target the kinases BRAF and MAPK and with more aggressive disease because it sequesters and inactivates the tumor suppressor merlin (encoded by NF2) inside abnormally large lamellipodia. Here, we investigated how these merlin-inactivating lamellipodia are maintained using quantitative, live cell imaging of cell morphology and signaling dynamics. We showed that Rac1 and merlin activity were regulated in spatially confined regions or microdomains within the lamellipodium. The role of merlin as a proliferation-limiting tumor suppressor required its ability to inhibit lamellipodial extension and to locally inhibit Rac1 signaling. Conversely, local inactivation of merlin in lamellipodia released these restraints on morphology and signaling, leading to enhanced proliferation. Merlin and Rac1 are thus in a morphologically and dynamically regulated double-negative feedback loop, a signaling motif that can amplify and stabilize modest stimuli of lamellipodia extensions that enable melanoma to sustain mitogenic signaling under growth challenge. This represents an example of how acute oncogenicity is promoted by collaborations between cell morphological programs and biochemical signaling.