Transmissible spongiform encephalopathies are fatal neurodegenerative diseases caused by the conversion of prion protein (PrP^C) into an infectious isoform (PrP^Sc). How this event leads to pathology is not fully understood. Here we demonstrate that protein synthesis in neurons is enhanced via PrP^C interaction with stress-inducible protein 1 (STI1). We also show that neuroprotection and neuritogenesis mediated by PrP^C–STI1 engagement are dependent upon the increased protein synthesis mediated by PI3K-mTOR signaling. Strikingly, the translational stimulation mediated by PrP^C–STI1 binding is corrupted in neuronal cell lines persistently infected with PrP^Sc, as well as in primary cultured hippocampal neurons acutely exposed to PrP^Sc. Consistent with this, high levels of eukaryotic translation initiation factor 2α (eIF2α) phosphorylation were found in PrP^Sc-infected cells and in neurons acutely exposed to PrP^Sc. These data indicate that modulation of protein synthesis is critical for PrP^C–STI1 neurotrophic functions, and point to the impairment of this process during PrP^Sc infection as a possible contributor to neurodegeneration.