Prion diseases result from conversion of PrPC, a neuronal membrane glycoprotein of unknown function, into PrPSc, an abnormal conformer that is thought to be infectious. To facilitate analysis of PrP distribution in the brain, we have generated transgenic mice in which a PrP promoter drives expression of PrP-EGFP, a fusion protein consisting of enhanced green fluorescent protein inserted adjacent to the glycolipid attachment site of PrP. We find that PrP-EGFP in the brain is glycosylated and glycolipid-anchored and is localized to the surface membrane and the Golgi apparatus of neurons. Like endogenous PrP, PrP-EGFP is concentrated in synapse-rich regions and along axon tracts. PrP-EGFP is functional in vivo, since it ameliorates the cerebellar neurodegeneration induced by a truncated form of PrP. These observations clarify uncertainties in the cellular localization of PrPC in brain, and they establish PrP-EGFP transgenic mice as useful models for further studies of prion biology.