The neurofibromatosis-2 (NF2) tumour-suppressor gene encodes an intracellular membrane-associated protein, called merlin, whose growth-suppressive function is dependent on its ability to form interactions through its intramolecular amino-terminal domain (NTD) and carboxy-terminal domain (CTD). Merlin phosphorylation plays a critical part in dictating merlin NTD/CTD interactions as well as in controlling binding to its effector proteins. Merlin is partially regulated by phosphorylation of Ser 518, such that hyperphosphorylated merlin is inactive and fails to form productive intramolecular and intermolecular interactions. Here, we show that the protein kinase Akt directly binds to and phosphorylates merlin on residues Thr 230 and Ser 315, which abolishes merlin NTD/CTD interactions and binding to merlin's effector protein PIKE-L and other binding partners. Furthermore, Akt-mediated phosphorylation leads to merlin degradation by ubiquitination. These studies demonstrate that Akt-mediated merlin phosphorylation regulates the function of merlin in the absence of an inactivating mutation.