Prion protein (PrPC) is implicated in the pathogenesis of prion disorders, but its normal function is unclear. We demonstrate that PrPC is a ferrireductase (FR), and its absence causes systemic iron deficiency in PrP knock-out mice (PrP-/-). When exposed to non-transferrin-bound (NTB) radioactive-iron (59FeCl3) by gastric-gavage, PrP-/- mice absorb significantly more 59Fe from the intestinal lumen relative to controls, indicating appropriate systemic response to the iron deficiency. Chronic exposure to excess dietary iron corrects this deficiency, but unlike wild-type (PrP+/+) controls that remain iron over-loaded, PrP-/- mice revert back to the iron deficient phenotype after 5 months of chase on normal diet. Bone marrow (BM) preparations of PrP-/- mice on normal diet show relatively less stainable iron, and this phenotype is only partially corrected by intraperitoneal administration of excess iron-dextran. Cultured PrP-/- BM-macrophages incorporate significantly less NTB-59Fe in the absence or presence of excess extracellular iron, indicating reduced uptake and/or storage of available iron in the absence of PrPC. When expressed in neuroblastoma cells, PrPC exhibits NAD(P)H-dependent cell-surface and intracellular FR activity that requires the copper-binding octa-peptide-repeat region and linkage to the plasma membrane for optimal function. Incorporation of NTB-59Fe by neuroblastoma cells correlates with FR activity of PrPC, implicating PrPC in cellular iron uptake and metabolism. These observations explain the correlation between PrPC expression and cellular iron levels, and the cause of iron imbalance in sporadic-Creutzfeldt-Jakob-disease brains where PrPC accumulates as insoluble aggregates.