In Alzheimer disease amyloid-β (Aβ) peptides derived from the amyloid precursor protein (APP) accumulate in the brain. Cleavage of APP by the β-secretase BACE1 is the rate-limiting step in the production of Aβ. We have reported previously that the cellular prion protein (PrP(C)) inhibited the action of BACE1 toward human wild type APP (APP(WT)) in cellular models and that the levels of endogenous murine Aβ were significantly increased in PrP(C)-null mouse brain. Here we investigated the molecular and cellular mechanisms underlying this observation. PrP(C) interacted directly with the prodomain of the immature Golgi-localized form of BACE1. This interaction decreased BACE1 at the cell surface and in endosomes where it preferentially cleaves APP(WT) but increased it in the Golgi where it preferentially cleaves APP with the Swedish mutation (APP(Swe)). In transgenic mice expressing human APP with the Swedish and Indiana familial mutations (APP(Swe,Ind)), PrP(C) deletion had no influence on APP proteolytic processing, Aβ plaque deposition, or levels of soluble Aβ or Aβ oligomers. In cells, although PrP(C) inhibited the action of BACE1 on APP(WT), it did not inhibit BACE1 activity toward APP(Swe). The differential subcellular location of the BACE1 cleavage of APP(Swe) relative to APP(WT) provides an explanation for the failure of PrP(C) deletion to affect Aβ accumulation in APP(Swe,Ind) mice. Thus, although PrP(C) exerts no control on cleavage of APP(Swe) by BACE1, it has a profound influence on the cleavage of APP(WT), suggesting that PrP(C) may be a key protective player against sporadic Alzheimer disease.