The neurofibromatosis 2 (NF2) tumor suppressor gene product, merlin, belongs to the ezrin-radixin-moesin (ERM) subgroup of the Protein 4.1 family, which links cell surface glycoproteins to the actin cytoskeleton. Previous studies have suggested that phosphorylation of merlin, similar to other ERM proteins, may regulate its function. To determine whether merlin phosphorylation has functional consequences for merlin suppression of cell growth and motility, we generated doxycycline-regulatable RT4 schwannoma cell lines that inducibly express full-length merlin with mutations at two potential phosphorylation sites (amino-acid residues S518 and T576). Whereas a mutation at S518 that mimics constitutive phosphorylation (S518D) abrogates the ability of merlin to suppress cell growth and motility, the S518A merlin mutant, which mimics nonphosphorylated merlin, functions equivalently to wild-type merlin. Similar mutations involving T576, the analogous phosphorylation site in ERM proteins important for regulating their function, had no effect. In contrast to other functionally inactive missense merlin mutants, the regulated overexpression of S518D merlin resulted in dramatic changes in cell shape and the elaboration of filopodial extensions. These results provide the first direct demonstration that the S518D merlin mutation, which mimics merlin phosphorylation, impairs not only merlin growth and motility suppression but also leads to an acquisition of a novel phenotype previously ascribed to ERM proteins.