Infectious mammalian prions can be formed de novo from purified recombinant prion protein (PrP) substrate through a pathway that requires the sequential addition of 1-palmitoyl-2-oleoyl-sn-glycero-3-phosphoglycerol (POPG) and RNA cofactor molecules. Recent studies show that the initial interaction between PrP and POPG causes widespread and persistent conformational changes to form an insoluble intermediate species, termed PrP(Int1). Here, we characterize the mechanism and functional consequences of the interaction between POPG and PrP. Negative-stain electron microscopy of PrP(Int1) revealed the presence of amorphous aggregates. Pull-down and photoaffinity label experiments indicate that POPG induces the formation of a PrP(C) polybasic-domain-binding neoepitope within PrP(Int1). The ongoing presence of POPG is not required to maintain PrP(Int1) structure, as indicated by the absence of stoichiometric levels of POPG in solid-state NMR measurements of PrP(Int1). Together, these results show that a transient interaction with POPG cofactor unmasks a PrP(C) binding site, leading to PrP(Int1) aggregation.