The molecular hallmark of prion disease is the conversion of normal prion protein (PrPC) to an insoluble, proteinase K-resistant, pathogenic isoform (PrPSc). Once generated, PrPSc propagates by complexing with, and transferring its pathogenic conformation onto, PrPC. Defining the specific nature of this PrPSc-PrPC interaction is critical to understanding prion genesis. To begin to approach this question, we employed a prion-infected neuroblastoma cell line (ScN2a) combined with a heterologous yeast expression system to independently model PrPSc generation and propagation. We additionally applied fluorescence resonance energy transfer analysis to the latter to specifically study PrP-PrP interactions. In this report we focus on an N-terminal hydrophobic palindrome of PrP (112-AGAAAAGA-119) thought to feature intimately in prion generation via an unclear mechanism. We found that, in contrast to wild type (wt) PrP, PrP lacking the palindrome (PrPDelta112-119) neither converted to PrPSc when expressed in ScN2a cells nor generated proteinase K-resistant PrP when expressed in yeast. Furthermore, PrPDelta112-119 was a dominant-negative inhibitor of wtPrP in ScN2a cells. Both wtPrP and PrPDelta112-119 were highly insoluble when expressed in yeast and produced distinct cytosolic aggregates when expressed as fluorescent fusion proteins (PrP::YFP). Although self-aggregation was evident, fluorescence resonance energy transfer studies in live yeast co-expressing PrPSc-like protein and PrPDelta112-119 indicated altered interaction properties. These results suggest that the palindrome is required, not only for the attainment of the PrPSc conformation but also to facilitate the proper association of PrPSc with PrPC to effect prion propagation.