Schwann cells lacking the tumor-suppressor-protein merlin tend in man to build benign tumors (schwannoma). We observed that characteristic features of these cells which are relevant to tumorigenicity resemble those described in cells with high Rac activity. Moreover this small GTPase also phosphorylates merlin via PAK activation. We hypothesized that merlin deficiency might cause an activation of Rac and its dependent signaling pathways, in particular the pro-tumorigenic JNK pathway. We show an enhanced activation of Rac1 in primary human schwannoma cells, find both Rac and its effector PAK at the membrane where they colocalize, and describe increased levels of phosphorylated JNK in the nucleus of these cells. Further we describe regulation at post-transcriptional level with upregulated protein, but not mRNA levels for Rac1, and JNK1/2. We conclude that merlin regulates Rac activation, and suggest that this is important for human schwannoma cell dedifferentiation.