Prions are the causative agent of the transmissible spongiform encephalopathies, such as Creutzfeldt-Jakob disease in humans. In these prion diseases the normal cellular form of the prion protein (PrP(C)) undergoes a post-translational conformational conversion to the infectious form (PrP(Sc)). PrP(C) associates with cholesterol- and glycosphingolipid-rich lipid rafts through association of its glycosyl-phosphatidylinositol (GPI) anchor with saturated raft lipids and through interaction of its N-terminal region with an as yet unidentified raft associated molecule. PrP(C) resides in detergent-resistant domains that have different lipid and protein compositions to the domains occupied by another GPI-anchored protein, Thy-1. In some cells PrP(C) may endocytose through caveolae, but in neuronal cells, upon copper binding to the N-terminal octapeptide repeats, the protein translocates out of rafts into detergent-soluble regions of the plasma membrane prior to endocytosis through clathrin-coated pits. The current data suggest that the polybasic region at its N-terminus is required to engage PrP(C) with a transmembrane adaptor protein which in turn links with the clathrin endocytic machinery. PrP(C) associates in rafts with a variety of signalling molecules, including caveolin-1 and Fyn and Src tyrosine kinases. The clustering of PrP(C) triggers a range of signal transduction processes, including the recruitment of the neural cell adhesion molecule to rafts which in turn promotes neurite outgrowth. Lipid rafts appear to be involved in the conformational conversion of PrP(C) to PrP(Sc), possibly by providing a favourable environment for this process to occur and enabling disease progression.