Proteolytic processing of the amyloid precursor protein (APP) by -secretase, -site APP cleaving enzyme (BACE1), is the initial step in the production of the amyloid  (A) peptide, which is involved in the pathogenesis of Alzheimer's disease. The normal cellular function of the prion protein (PrP C ), the causative agent of the transmissible spongiform encephalopathies such as CreutzfeldtJakob disease in humans, remains enigmatic. Because both APP and PrP C are subject to proteolytic processing by the same zinc metalloproteases, we tested the involvement of PrP C in the proteolytic processing of APP. Cellular overexpression of PrP C inhibited the -secretase cleavage of APP and reduced A formation. Conversely, depletion of PrP C in mouse N2a cells by siRNA led to an increase in A peptides secreted into the medium. In the brains of PrP knockout mice and in the brains from two strains of scrapieinfected mice, A levels were significantly increased. Two mutants of PrP, PG14 and A116V, that are associated with familial human prion diseases failed to inhibit the -secretase cleavage of APP. Using constructs of PrP, we show that this regulatory effect of PrP C on the -secretase cleavage of APP required the localization of PrP C to cholesterol-rich lipid rafts and was mediated by the N-terminal polybasic region of PrP C via interaction with glycosaminoglycans. In conclusion, this is a mechanism by which the cellular production of the neurotoxic A is regulated by PrP C and may have implications for both Alzheimer's and prion diseases.lipid raft ͉ proteolysis ͉ scrapie ͉ glycosaminoglycan A lzheimer's disease (AD) is characterized by the presence of extracellular senile plaques and intracellular neurofibrillary tangles within the afflicted brain. The major constituents of senile plaques are the amyloid  (A) peptides, which are derived from the proteolytic processing of the amyloid precursor protein (APP) (1). In the amyloidogenic pathway, -secretase cleavage of APP yields a soluble N-terminal fragment sAPP, along with a short membrane-bound C-terminal fragment that is subsequently cleaved by ␥-secretase to release the A peptides. In the alternative, nonamyloidogenic pathway, ␣-secretase cleaves APP within the A sequence, thus precluding the formation of A, and releases a soluble N-terminal fragment sAPP␣. The transmembrane aspartyl protease, -site APP cleaving enzyme (BACE1), has been identified as -secretase (2), members of the ADAM (a disintegrin and metalloprotease) family, particularly ADAM10 and ADAM17, are responsible for ␣-secretase cleavage (3), while a complex of at least four proteins, the presenilins, nicastrin, Aph-1, and Pen-2, constitutes the ␥-secretase (2).The prion protein (PrP) is the causative agent of the transmissible spongiform encephalopathies (TSEs) that include CreutzfeldtJakob disease (CJD), Gerstmann-Scheinker-Straussler (GSS) disease, kuru and fatal familial insomnia in humans, bovine spongiform encephalopathy in cattle, and scrapie in sheep (4). In these diseases, the normal ce...