Former goalkeeper Merrick is one of Blues' most recognised players having made 551 appearances between an astonishing 21-year period - 1939 to 1960.
He played a huge part in the most successful period in the club's history before going into management and guiding Birmingham to their only major cup triumph to date - a 3-1 aggregate victory over Aston Villa in the 1963 League Cup final.
Chairman David Gold told the club's official website: "We are honoured and privileged to be able to dedicate the stand to Gil. Bringing the club's history back to St Andrew's as part of the pledge is very important to me. The renaming of the Railway Stand is a great way to do this."
Elsewhere, Blues' crucial final game of the season away at Reading has been selected by Sky to be shown live on Sunday, with the 1.15pm kick-off time unchanged.