Valproic acid (VPA), the drug for bipolar disorder and epilepsy, has a potent ability to induce neuronal differentiation, yet comparatively little is presently known about the underlying mechanism. We previously demonstrated that c-Jun N-terminal kinase (JNK) phosphorylation of the focal adhesion protein paxillin mediates differentiation in N1E-115 neuroblastoma cells. Here, we show that VPA up-regulates the neurofibromatosis type 2 (NF2) tumor suppressor, merlin, to regulate neurite outgrowth through the interaction with paxillin. The inhibition of merlin function by its knockdown or expression of merlin harboring the Gln-538-to-Pro mutation, a naturally occurring NF2 missense mutation deficient in linking merlin to the actin cytoskeleton, decreases VPA-induced neurite outgrowth. Importantly, the expression of merlin by itself is not sufficient to induce neurite outgrowth, which requires co-expression with paxillin, the binding partner of merlin. In fact, the missense mutation Trp-60-to-Cys or Phe-62-to-Ser, that is deficient in binding to paxillin, reduces neurite outgrowth induced by VPA. In addition, co-expression of a paxillin construct harboring the mutation at the JNK phosphorylation site with merlin results in blunted induction of the outgrowth. We also find that the first LIM domain of paxillin is a major binding region with merlin and that expression of the isolated first LIM domain blocks the effects of VPA. Furthermore, similar findings that merlin regulates neurite outgrowth through the interaction with paxillin have been observed in several kinds of neuronal cells. These results suggest that merlin is an as yet unknown regulator of neurite outgrowth through the interaction with paxillin, providing a possibly common mechanism regulating neurite formation.