The neurofibromatosis 2 (NF2) tumor suppressor gene encodes a protein with sequence similarity to a family of molecules linking cell membrane proteins to the actin cytoskeleton. Individuals affected with NF2 develop schwannomas at an increased frequency. In this paper, we report that merlin is expressed in Schwann cells, where it is localized in vitro to the cell membrane by immunohistochemistry and subcellular fractionation. Exogenous expression of merlin fragments confirms this subcellular distribution and suggests that both the N-terminal and C-terminal portions of the molecule are required for this localization. In addition, merlin is expressed in rat sciatic nerve Schwann cells at paranodal membranes, where it colocalizes with RhoA. Lastly, expression of the NF2 gene increases during postnatal rat sciatic nerve development, consistent with its role as a negative growth regulator for Schwann cells. These results collectively suggest that merlin may function at the cell surface to modulate cell growth in Schwann cells and to link cell membrane proteins to the cytoskeleton.