The actor, who starred as Gavin Ferraday in the hairdressing drama, will play handsome business tycoon Declan in the ITV1 soap.
Merrells, whose previous credits include Casualty, Waterloo Road and Lark Rise To Candleford, said: "I'm thrilled to be joining a show as respected and well-loved as Emmerdale and look forward to filming my first scenes later this month."
The actor, who will be seen in Emmerdale at the end of April, added: "Declan's an enigmatic mogul who is bound to raise a few eyebrows in the village."
The character will acquire a stake in the Home Farm estate when murderess Natasha Wylde (Amanda Donohoe) finds herself in need of investors.
Natasha is newly single after bumping off her bigamist husband Mark (Maxwell Caulfield), and viewers will learn whether she is looking for more than just financial help.
Series producer Gavin Blyth said: "I'm delighted to be welcoming Jason to the cast. He is an extremely talented actor and will be brilliant in the role of Declan. Jason's role will continue to take the show forward in this very exciting time for Emmerdale."