The neurofibromatosis 2 (NF2) tumor suppressor gene encodes an intracellular membrane-associated protein, called merlin (or schwannomin), that belongs to the band 4.1 family of cytoskeleton-associated proteins. Inactivating NF2 mutations occur in several sporadic tumor types and have been linked to the NF2 disease, whose hallmark is the development of bilateral Schwann cell tumors (schwannomas) of the eighth cranial nerve. Two major alternatively spliced NF2 variants are expressed in normal tissues: 'NF2-17' lacking exon 16 and 'NF2-16' that contains exon 16 and encodes a merlin protein truncated at the C-terminus. We report that overexpression of NF2-17 in rat schwannoma cells inhibits their growth in vitro and in vivo, while NF2-16 fails to influence schwannoma growth. Tumor growth inhibition by merlin depends on an interdomain association occurring either in cis or in trans between the N- and C-termini. This association does not occur in the truncated NF2-16 protein nor in a mutant NF2-17 protein lacking C-terminal sequences. These data indicate that merlin has a unique mechanism of tumor suppression, inhibiting cell proliferation via self-association.