Neurofibromatosis Type 2 is an inherited disease characterized by Schwann cell tumors of cranial and peripheral nerves. The NF2 gene encodes Merlin, a member of the ERM family consisting of an N-terminal FERM domain, a central α-helical region, and a C-terminal domain. Changes in the intermolecular FERM-CTD interaction allow Merlin to transition between an open, FERM accessible conformation and a closed, FERM-inaccessible conformation, modulating Merlin activity. Merlin has been shown to dimerize, but the regulation and function Merlin dimerization is not clear. We used a nanobody based binding assay to show that Merlin dimerizes via a FERM-FERM interaction, orientated with each C-terminus close to each other. Patient derived and structural mutants show that dimerization controls interactions with specific binding partners, including HIPPO pathway components, and correlates with tumor suppressor activity. Gel filtration experiments showed that dimerization occurs after a PIP₂ mediated transition from closed to open conformation monomers. This process requires the first 18 amino acids of the FERM domain and is inhibited by phosphorylation at serine 518. The discovery that active, open conformation Merlin is a dimer represents a new paradigm for Merlin function with implications for the development of therapies designed to compensate for Merlin loss.