The molecular signals that control the maintenance and activation of liver stem/progenitor cells are poorly understood, and the role of liver progenitor cells in hepatic tumorigenesis is unclear. We report here that liver-specific deletion of the neurofibromatosis type 2 (Nf2) tumor suppressor gene in the developing or adult mouse specifically yields a dramatic, progressive expansion of progenitor cells throughout the liver without affecting differentiated hepatocytes. All surviving mice eventually developed both cholangiocellular and hepatocellular carcinoma, suggesting that Nf2^−/− progenitors can be a cell of origin for these tumors. Despite the suggested link between Nf2 and the Hpo/Wts/Yki signaling pathway in Drosophila, and recent studies linking the corresponding Mst/Lats/Yap pathway to mammalian liver tumorigenesis, our molecular studies suggest that Merlin is not a major regulator of YAP in liver progenitors, and that the overproliferation of Nf2^−/− liver progenitors is instead driven by aberrant epidermal growth factor receptor (EGFR) activity. Indeed, pharmacologic inhibition of EGFR blocks the proliferation of Nf2^−/− liver progenitors in vitro and in vivo, consistent with recent studies indicating that the Nf2-encoded protein Merlin can control the abundance and signaling of membrane receptors such as EGFR. Together, our findings uncover a critical role for Nf2/Merlin in controlling homeostasis of the liver stem cell niche.