[URE3] is a non-Mendelian genetic element of the yeast Saccharomyces cerevisiae, an altered prion form of Ure2 protein. We show that recombinant Ure2p is a soluble protein that can assemble in vitro into dimers, tetramers, and octamers or form insoluble fibrils observed for PrP in its filamentous form or for Sup35p upon self-assembling, suggesting a similar mechanism for all prions. Computational, genetic, biochemical, and structural data allow us to specify a new boundary between the so-called prion-forming and nitrogen regulator (catalytic) domains of the protein and to map this boundary to Met-94. We bring strong evidence that the COOH-terminal (94-354) part of the protein forms a tightly folded domain, while the NH2-terminal (1-94) part is unstructured. These domains (or various parts of these domains) were shown (by means of the two-hybrid system approach and affinity binding experiments) to interact with each other (both in vivo and in vitro). We bring also evidence that the COOH-terminal (94-354) catalytically active part of the protein can be synthesized (both in vitro and in vivo) via an internal ribosome-binding mechanism, independently of the production of the full-length protein. We finally show that Ure2p aggregation in vivo (monitored by fluorescence of Ure2p--GFP fusion) does not necessarily give rise to [URE3] phenotype. The significance of these findings for the appearance and propagation of the yeast prion [URE3] is discussed.