The development of small-molecule pharmacological chaperones as therapeutics for protein misfolding diseases has proven challenging, partly because their mechanism of action remains unclear. Here we study Fe-TMPyP, a tetrapyrrole that binds to the prion protein PrP and inhibits misfolding, examining its effects on PrP folding at the single-molecule level with force spectroscopy. Single PrP molecules are unfolded with and without Fe-TMPyP present using optical tweezers. Ligand binding to the native structure increases the unfolding force significantly and alters the transition state for unfolding, making it more brittle and raising the barrier height. Fe-TMPyP also binds the unfolded state, delaying native refolding. Furthermore, Fe-TMPyP binding blocks the formation of a stable misfolded dimer by interfering with intermolecular interactions, acting in a similar manner to some molecular chaperones. The ligand thus promotes native folding by stabilizing the native state while also suppressing interactions driving aggregation.