Merkel was born into the family of a rural priest in Livonia. From the age of 17, he worked as a tutor for upper-class families. In 1790, he joined the circle of Riga intellectuals. Influenced by the ideas he found there, he published the book Die Letten ("Latvians", full title: "Die Letten vorzüglich in Liefland am Ende des philosophischen Jahrhunderts, Ein Beytrag zur Völker- und Menschenkunde") in 1796, which described in the darkest terms the life of the peasantry and the atrocities of the Baltic German landowners and called upon the Imperial Russian government to intervene and ameliorate the lot of the Latvian people. The book gained considerable popularity in the German society and was translated into French, Danish and Russian. In 1800, the original German version of the book was re-published. Finally, in the 20th century it was translated also into Latvian.
Merkel's book caused a storm of anger among the landowners of Livonia, and Merkel was forced into exile. He moved to Weimar, then in 1800 to Berlin, where he was the co-editor with August von Kotzebue of the weekly Der Freimutige (1803-1806).
In 1816, Merkel returned to Livonia. He published the book My Ten Years in Germany (1818) and Images and Characters from My Life (two volumes, 1839-1840). He also wrote the pamphlet Free Latvians and Estonians (1820), which was published in Leipzig.