The prion consists essentially of PrP(Sc), a misfolded and aggregated conformer of the cellular protein PrP(C). Whereas PrP(C) deficient mice are clinically healthy, expression of PrP(C) variants lacking its central domain (PrP(DeltaCD)), or of the PrP-related protein Dpl, induces lethal neurodegenerative syndromes which are repressed by full-length PrP. Here we tested the structural basis of these syndromes by grafting the amino terminus of PrP(C) (residues 1-134), or its central domain (residues 90-134), onto Dpl. Further, we constructed a soluble variant of the neurotoxic PrP(DeltaCD) mutant that lacks its glycosyl phosphatidyl inositol (GPI) membrane anchor. Each of these modifications abrogated the pathogenicity of Dpl and PrP(DeltaCD) in transgenic mice. The PrP-Dpl chimeric molecules, but not anchorless PrP(DeltaCD), ameliorated the disease of mice expressing truncated PrP variants. We conclude that the amino proximal domain of PrP exerts a neurotrophic effect even when grafted onto a distantly related protein, and that GPI-linked membrane anchoring is necessary for both beneficial and deleterious effects of PrP and its variants.