The expression of the tumor suppressor Merlin is compromised in nervous system malignancies due to genomic aberrations. We demonstrated for the first time, that in breast cancer, Merlin protein expression is lost due to proteasomemediated elimination. Immunohistochemical analysis of tumor tissues from patients with metastatic breast cancer revealed characteristically reduced Merlin expression. Importantly, we identified a functional role for Merlin in impeding breast tumor xenograft growth and reducing invasive characteristics. We sought to determine a possible mechanism by which Merlin accomplishes this reduction in malignant activity. We observed that breast and pancreatic cancer cells with loss of Merlin show an aberrant increase in the activity of β-catenin concomitant with nuclear localization of β-catenin. We discovered that Merlin physically interacts with β-catenin, alters the sub-cellular localization of β-catenin, and significantly reduces the protein levels of β-catenin by targeting it for degradation through the upregulation of Axin1. Consequently, restoration of Merlin inhibited β-catenin-mediated transcriptional activity in breast and pancreatic cancer cells. We also present evidence that loss of Merlin sensitizes tumor cells to inhibition by compounds that target β-cateninmediated activity. Thus, this study provides compelling evidence that Merlin reduces the malignant activity of pancreatic and breast cancer, in part by suppressing the Wnt/β-catenin pathway. Given the potent role of Wnt/β-catenin signaling in breast and pancreatic cancer and the flurry of activity to test β-catenin inhibitors in the clinic, our findings are opportune and provide evidence for Merlin in restraining aberrant activation of Wnt/β-catenin signaling.