Mutations of the neurofibromatosis 2 (NF2) tumor suppressor gene have frequently been detected not only in schwannomas and other central nervous system tumors of NF2 patients but also in their sporadic counterparts and malignant tumors unrelated to the NF2 syndrome such as malignant mesothelioma, indicating a broader role for the NF2 gene in human tumorigenesis. However, the mechanisms by which the NF2 product, merlin or schwannomin, is regulated and controls cell proliferation remain elusive. Here, we identify a novel GTP-binding protein, dubbed NGB (referring to NF2-associated GTP binding protein), which binds to merlin. NGB is highly conserved between Saccharomyces cerevisiae, Caenorhabditis elegans, and human cells, and its GTP-binding region is very similar to those found in R-ras and Rap2. However, ectopic expression of NGB inhibits cell growth, cell aggregation, and tumorigenicity in tumorigenic schwanomma cells. Down-regulation and infrequent mutation of NGB were detected in human glioma cell lines and primary tumors. The interaction of NGB with merlin impairs the turnover of merlin, yet merlin does not affect the GTPase nor GTP-binding activity of NGB. Finally, the tumor suppressor functions of NGB require merlin and are linked to its ability to suppress cyclin D1 expression. Collectively, these findings indicate that NGB is a tumor suppressor that regulates and requires merlin to suppress cell proliferation.