Misfolding of the prion protein (PrP) plays a central role in the pathogenesis of infectious, sporadic, and inherited prion diseases. Here we use a chemically defined prion propagation system to study misfolding of the pathogenic PrP mutant D177N in vitro. This mutation causes PrP to misfold spontaneously in the absence of cofactor molecules in a process dependent on time, temperature, pH, and intermittent sonication. Spontaneously misfolded mutant PrP is able to template its unique conformation onto wild-type PrP substrate in a process that requires a phospholipid activity distinct from that required for the propagation of infectious prions. Similar results were obtained with a second pathogenic PrP mutant, E199K, but not with the polymorphic substitution M128V. Moreover, wild-type PrP inhibits mutant PrP misfolding in a dose-dependent manner, and cofactor molecules can antagonize this effect. These studies suggest that interactions between mutant PrP, wild-type PrP, and other cellular factors may control the rate of PrP misfolding in inherited prion diseases.