The tumor suppressor Merlin/NF2 functions upstream of the core Hippo pathway kinases Lats1/2 and Mst1/2, as well as the nuclear E3 ubiquitin ligase CRL4(DCAF1). Numerous mutations of Merlin have been identified in Neurofibromatosis type 2 and other cancer patients. Despite more than two decades of research, the upstream regulator of Merlin in the Hippo pathway remains unknown. Here we show by high-resolution crystal structures that the Lats1/2-binding site on the Merlin FERM domain is physically blocked by Merlin's auto-inhibitory tail. Angiomotin binding releases the auto-inhibition and promotes Merlin's binding to Lats1/2. Phosphorylation of Ser518 outside the Merlin's auto-inhibitory tail does not obviously alter Merlin's conformation, but instead prevents angiomotin from binding and thus inhibits Hippo pathway kinase activation. Cancer-causing mutations clustered in the angiomotin-binding domain impair angiomotin-mediated Merlin activation. Our findings reveal that angiomotin and Merlin respectively interface cortical actin filaments and core kinases in Hippo signaling, and allow construction of a complete Hippo signaling pathway.