The neurofibromatosis type 2 tumor suppressor gene is inactivated in the development of familial and sporadic schwannomas and meningiomas. The encoded protein, Merlin, is closely related to the Ezrin, Radixin, and Moesin family of membrane/cytoskeletal linker proteins. Examination of Merlin in several cell lines revealed that the protein migrates as two distinct species near 70 kDa. Phosphatase treatment and orthophosphate labeling demonstrated that the species with decreased mobility is phosphorylated. Given Merlin's localization to cortical actin structures, we examined the effect of cell-cell contact or other forms of growth arrest on Merlin expression and post-translational modification. Under conditions of confluency or serum deprivation, the levels of phosphorylated and unphosphorylated Merlin species increased significantly. Cells arrested in G1 by other methods or other phases of the cell cycle did not show changes in Merlin levels. Furthermore, loss of adhesion resulted in a nearly complete dephosphorylation of Merlin, which was reversed upon re-plating of cells, suggesting Merlin phosphorylation may be responsive to cell spreading or changes in cell shape. Thus, the tumor suppressor function of Merlin may involve the regulation of cellular responses to cues such as cell-cell contact, growth factor microenvironment, or changes in cell shape.