In sprouting angiogenesis, the precise mechanisms underlying how intracellular vascular endothelial growth factor receptor 2 (VEGFR2) signaling is higher in one endothelial cell (EC) compared with its neighbor and acquires the tip EC phenotype under a similar external cue are elusive. Here, we show that Merlin, encoded by the neurofibromatosis type 2 (NF2) gene, suppresses VEGFR2 internalization depending on VE-cadherin density and inhibits tip EC induction. Accordingly, endothelial Nf2 depletion promotes tip EC induction with excessive filopodia by enhancing VEGFR2 internalization in both the growing and matured vessels. Mechanistically, Merlin binds to the VEGFR2-VE-cadherin complex at cell-cell junctions and reduces VEGFR2 internalization-induced downstream signaling during tip EC induction. As a consequence, nonfunctional excessive sprouting occurs during tumor angiogenesis in EC-specific Nf2-deleted mice, leading to delayed tumor growth. Together, Nf2/Merlin is a crucial molecular gatekeeper for tip EC induction, capillary integrity, and proper tumor angiogenesis by suppressing VEGFR2 internalization.