There is evidence that alterations in the normal physiological activity of PrPC contribute to prion-induced neurotoxicity. This mechanism has been difficult to investigate, however, because the normal function of PrP C has remained obscure, and there are no assays available to measure it. We recently reported that cells expressing PrP deleted for residues 105-125 exhibit spontaneous ionic currents and hypersensitivity to certain classes of cationic drugs. Here, we utilize cell culture assays based on these two phenomena to test how changes in PrP sequence and/or cellular localization affect the functional activity of the protein. We report that the toxic activity of A105-125 PrP requires localization to the plasma membrane and depends on the presence of a polybasic amino acid segment at the N terminus of PrP. Several different deletions spanning the central region as well as three disease-associated point mutations also confer toxic activity on PrP. The sequence domains identified in our study are also critical for PrPSc formation, suggesting that common structural features may govern both the functional activity of PrPC and its conversion to PrPSc.