Merlin, encoded by the Neurofibromatosis 2 (NF2) gene, is a multifunctional tumor suppressor that integrates and regulates extracellular cues and intracellular signaling pathways, both at the plasma membrane and in the nucleus, to control cell proliferation, migration and invasion. Molecular mechanisms regulating merlin's tumor-suppressive activity have not been clearly defined. Here we report that merlin can be sumoylated on Lysine residue (K76) in vitro and in vivo. Sumoylation mediates merlin's intramolecular and intermolecular binding activities and regulates its cytoplasm/nucleus trafficking. Interestingly, sumoylation of merlin is regulated by its phosphorylation via Akt and PAK2 kinases. Mutation of K76 into arginine (R) abolishes its sumoylation, disrupts merlin cortical cytoskeleton residency and attenuates its stability. Using a K76R mutant merlin in a subcutaneous U87MG xenograft model, we demonstrate that merlin sumoylation is required for tumor-suppressive activity. Taken together, our findings indicate that merlin is sumoylated and that this post-translational modification is essential for tumor suppression.