The principal infectious and pathogenic agent in all prion disorders is a beta-sheet-rich isoform of the cellular prion protein (PrP(C)) termed PrP-scrapie (PrP(Sc)). Once initiated, PrP(Sc) is self-replicating and toxic to neuronal cells, but the underlying mechanisms remain unclear. In this report, we demonstrate that PrP(C) binds iron and transforms to a PrP(Sc)-like form (*PrP(Sc)) when human neuroblastoma cells are exposed to an inorganic source of redox iron. The *PrP(Sc) thus generated is itself redox active, and it induces the transformation of additional PrP(C), simulating *PrP(Sc) propagation in the absence of brain-derived PrP(Sc). Moreover, limited depletion of iron from prion disease-affected human and mouse brain homogenates and scrapie-infected mouse neuroblastoma cells results in 4- to 10-fold reduction in proteinase K (PK)-resistant PrP(Sc), implicating redox iron in the generation, propagation, and stability of PK-resistant PrP(Sc). Furthermore, we demonstrate increased redox-active ferrous iron levels in prion disease-affected brains, suggesting that accumulation of PrP(Sc) is modulated by the combined effect of imbalance in brain iron homeostasis and the redox-active nature of PrP(Sc). These data provide information on the mechanism of replication and toxicity by PrP(Sc), and they evoke predictable and therapeutically amenable ways of modulating PrP(Sc) load.