android data binding with a custom view

Data binding works even with merge only parent had to be "this" and attach to parent true.

binding = DataBindingUtil.inflate(inflater, R.layout.view_toolbar, this, true)

In your Custom View, inflate layout however you normally would and provide a setter for the attribute you want to set:

private MyCustomViewBinding mBinding;
public MyCustomView(...) {
    ...
    LayoutInflater inflater = (LayoutInflater)
        context.getSystemService(Context.LAYOUT_INFLATER_SERVICE);
    mBinding = MyCustomViewBinding.inflate(inflater);
}

public void setMyViewModel(MyViewModelObject obj) {
    mBinding.setMyViewModel(obj);
}

Then in the layout you use it in:

<layout xmlns...>
    <data>
        <variable
            name="myViewModel"
            type="com.mypath.MyViewModelObject" />
    </data>

    <LinearLayout
        android:layout_width="match_parent"
        android:layout_height="match_parent">

        <com.mypath.MyCustomView
            android:id="@+id/my_view"
            app:myViewModel="@{myViewModel}"
            android:layout_width="match_parent"
            android:layout_height="40dp"/>

    </LinearLayout>
</layout>

In the above, an automatic binding attribute is created for app:myViewModel because there is a setter with the name setMyViewModel.