H1517+656 is an unusual source, even for a BL Lac object. It is one of the most luminous BL Lac objects known, with extreme emission properties at radio, optical, and X-ray frequencies. Furthermore, in our WFPC2 snapshot survey we discovered a series of peculiar arcs describing a 2.4" radius ring surrounding the source. This paper describes follow-up observations with additional WFPC2 bands and the STIS long-pass filter, which have revealed this structure to be the remnants of a very recent galaxy merger. Population synthesis modeling has shown that regions of the arcs have stellar populations with age<20 Myr. In addition, the circularity of the arcs indicates that the plane of the collision and hence accretion is very close to the plane of the sky. Given that BL Lac jets are thought to be aligned with the line of sight, this observation may provide a direct link between the transfer of angular momentum in an interaction and the generation of a radio source.