Familial prion diseases are thought to result from a change in structure of the mutant prion protein (PrP), which takes a pathogenic conformation. We have examined the role of molecular chaperones in the folding of normal and mutant PrP Q217R (PrP(217)) in transfected neuroblastoma cells. In a previous report we showed that, although most of the PrP(217) forms escape the endoplasmic reticulum quality control system and aggregate in post-Golgi compartments, a significant proportion of PrP(217) retains the C-terminal glycosylphosphatidyl inositol signal peptide (PrP32), and does not exit the endoplasmic reticulum (Singh, N., Zanusso, G., Chen, S. G., Fujioka, H., Richardson, S., Gambetti, P., and Petersen, R. B. (1997) J. Biol. Chem. 272, 28461-28470). We have now studied the folding and turnover of PrP32 to understand the mechanism by which abnormal PrP forms cause cellular toxicity in our cell culture model and in the human brain carrying the Gerstmann-Sträussler-Scheinker disease Q217R mutation. In this report, we show that PrP32 remains associated with the chaperone BiP for an abnormally prolonged period of time and is degraded by the proteasomal pathway. This study is the first demonstration that BiP is chaperoning the folding of PrP and plays a role in maintaining the quality control in the PrP maturation pathway. Our data provide new insight into the diverse pathways of mutant PrP metabolism and neurotoxicity.