The signalling activities of Merlin and Moesin, two closely related members of the protein 4.1 Ezrin/Radixin/Moesin family, are regulated by conformational changes. These changes are regulated in turn by phosphorylation. The same sterile 20 kinase-Slik co-regulates Merlin or Moesin activity whereby phosphorylation inactivates Merlin, but activates Moesin. Thus, the corresponding coordinate activation of Merlin and inactivation of Moesin would require coordinated phosphatase activity. We find that Drosophila melanogaster protein phosphatase type 1 β (flapwing) fulfils this role, co-regulating dephosphorylation and altered activity of both Merlin and Moesin. Merlin or Moesin are detected in a complex with Flapwing both in-vitro and in-vivo. Directed changes in flapwing expression result in altered phosphorylation of both Merlin and Moesin. These changes in the levels of Merlin and Moesin phosphorylation following reduction of flapwing expression are associated with concomitant defects in epithelial integrity and increase in apoptosis in developing tissues such as wing imaginal discs. Functionally, the defects can be partially recapitulated by over expression of proteins that mimic constitutively phosphorylated or unphosphorylated Merlin or Moesin. Our results suggest that changes in the phosphorylation levels of Merlin and Moesin lead to changes in epithelial organization.