The role of the N-terminal half of the prion protein (PrPC) in normal cellular function and pathology remains enigmatic. To investigate the biological role of the N-terminus of PrP, we examined the cellular properties of a construct of murine PrP, PrP-DA, in which the N-terminus is tethered to the membrane by an uncleaved signal peptide and which retains the glycosyl-phosphatidylinositol anchor. Human neuroblastoma SH-SY5Y cells expressing PrP-DA were more susceptible to hydrogen peroxide and copper induced toxicity than wtPrP expressing cells. The PrP-DA expressing cells had an increased level of intracellular free radicals and reduced levels of superoxide dismutase and glutathione peroxidase as compared to the wtPrP expressing cells. The membrane topology, cell surface location, lipid raft localisation, intracellular trafficking and copper-mediated endocytosis of PrP-DA were not significantly different from wtPrP. However, cells expressing PrP-DA accumulated an N-terminal fragment that was resistant to proteinase K. The data presented here are consistent with the N-terminal region of PrPC having a role in the cellular response to oxidative stress, and that tethering this region of the protein to the membrane compromises this function through the accumulation of a protease-resistant N-terminal fragment, similar to that seen in some forms of human prion disease.