The Arsenal midfielder, on the pitch for barely six minutes, latched onto a slick Ferran Torres pass and finished clinically past Diogo Costa to settle a fiercely contested Round of 16 tie at Dallas Stadium.
Spain remain the only side yet to concede a goal at the tournament and will face the winner of USA and Belgium in the last eight on Friday in Los Angeles.
Luis de la Fuente's side started brightly, with Diogo Costa producing smart stops to deny Lamine Yamal and Alex Baena in quick succession.
Portugal grew into the contest and might have led before the break, Nuno Mendes seeing a low drive cannon back off the crossbar via a deflection off Pedro Porro. Mendes was forced off injured just past the hour, a blow to Roberto Martinez's side.
Ronaldo, playing his farewell World Cup match, tested Unai Simon from a tight angle in the second half, while Bernardo Silva also went close, heading narrowly over.
With the game seemingly destined for extra time, substitutes combined to break Portuguese hearts. Torres, introduced late on, slipped Merino through and the Arsenal man made no mistake, finding the near corner beyond Costa.
"The decisive players were those who came off the bench. I told Merino he should play how he always does. His role is to support the midfielders and the forwards. With him, we were thinking about giving the team the rhythm and energy it needed. The players' impact from the bench has been masterful, but that's because we have 26 players of a very high level," said De La Fuente.
Portugal midfielder Bruno Fernandes said, "Obviously we are sad. We came here with one goal: to win the whole thing. Unfortunately we were not at our best level.
"I think we played better in the first half today, but in the second half we made the same mistake of defending too low on the pitch, giving the ball to them. When this happens, sooner or later you are going to concede a goal. Congratulations to Spain, they have quality, but I think that if we continued doing what we did in the first half, we could have had a better result."
Martinez, who confirmed after the match that he was leaving his role as head coach, praised his players despite the disappointment.
"The Portuguese people can be proud of this team and these players. It's a real pity. We hit the crossbar. I think we deserved to take the game into extra time. We defended well. We were playing against one of the favourites to win the World Cup. Maybe we were just missing a bit of luck. Luck wasn't on our side today, but it was a very evenly matched game," said Martinez.
The result brought the curtain down on the international careers of both Ronaldo and Martinez.